PVH raises FY16 earnings guidance as Q1 revenues rise 3 percent

PVH revenue increased 3 percent on a constant currency basis and 2 percent on a GAAP basis to 1.92 billion dollars compared to the prior year’s first quarter revenue of 1.88 billion dollars. The company said that Calvin Klein and Tommy Hilfiger businesses outperformed revenue expectations.

Commenting on these results, Emanuel Chirico, Chairman and CEO, noted, “We are very pleased with our first quarter 2016 results, which exceeded our expectations despite the difficult retail environment experienced in the US market. Looking ahead to the remainder of 2016, we are increasing our earnings guidance on a non-GAAP basis for the year, while continuing to take a prudent approach to planning our business, as foreign currency and global consumer spending remain unpredictable and the US retail market is increasingly volatile and promotional.”

First quarter brand segment review

Revenue in the Calvin Klein business for the quarter increased 13 percennt on a constant currency basis and 11 percent on a GAAP basis from 654 million dollars in the prior year’s first quarter. Calvin Klein North America revenue increased 14 percent on a constant currency basis and 12 percent on a GAAP basis compared to 339 million dollars in the first quarter of 2015 primarily driven by growth of over 20 percent in the North America wholesale business due to strong performance in all businesses, particularly underwear.

Revenue in the North America retail business grew modestly as square footage expansion in company-operated stores was partially offset by a 4 percent comparable store sales decline driven by the continued weakness in traffic and consumer spending trends in Calvin Klein’s US stores located in international tourist locations. Calvin Klein International revenue increased 13 percent on a constant currency basis and 9 percent on a GAAP basis from 315 million dollars in the prior year’s first quarter due to continued strong growth in Europe.

The Asia business was negatively impacted by the timing of the Chinese New Year. Calvin Klein International comparable store sales decreased 1percent, as declines in Korea, Hong Kong and Brazil offset continued growth in Europe and China.

PVH raises FY16 earnings guidance as Q1 revenues rise 3 percent

Revenue in the Tommy Hilfiger business for the quarter increased 4 percent on a constant currency basis and 3 percent on a GAAP basis from 767 million dollars in the prior year’s first quarter. Tommy Hilfiger North America revenue decreased 5 percent on both a constant currency and a GAAP basis, due to continued softness in the retail business. North America comparable store sales declined 10 percent driven by continued weakness in traffic and consumer spending trends in Tommy Hilfiger’s US stores located in international tourist locations. An 11 percent increase on both a constant currency and a GAAP basis in Tommy Hilfiger International revenue from 413 million dollars in the prior year’s first quarter, was driven by continued momentum across Europe, including an 8 percent increase in comparable store sales and strong wholesale growth in the region.

Revenue in the Heritage Brands business for the quarter decreased 12 percent from 458 million dollars in the prior year’s first quarter, driven by the ongoing rationalisation of the Heritage Brands business, including the exit from the Izod retail business and the discontinuation of several licensed product lines in the dress furnishings business, partially offset by a 12 percent increase in comparable store sales in the Van Heusen business.

First quarter consolidated earnings and guidance

Earnings before interest and taxes increased 18 percent on a non-GAAP and constant currency basis and decreased 4 percent including foreign currency exchange rate impacts from 196 million dollars in the prior year’s first quarter. Earnings before interest and taxes increased to 295 million dollars on a GAAP basis compared to 177 million dollars, driven primarily by the net pre-tax gain recorded in connection with the TH China acquisition.

The company currently expects its full year 2016 earnings per share results will be negatively impacted compared to 2015 by approximately1.55 dollars per share attributable to foreign currency exchange rates. The 2016 guidance reflects the company’s acquisition of the 55 percent interest in TH China, which closed in mid-April 2016. The acquisition is expected to add approximately 120 million dollars of revenue. The 2016 guidance also assumes a revenue reduction of approximately 55 million dollars in conjunction with the proposed transaction announced in May 2016 to form a joint venture in Mexico.

The Company currently projects that 2016 earnings per share will be in a range of 6.45 dollars to 6.55 dollars on a non-GAAP basis, which includes approximately 1.55 dollars per share negative impact related to foreign currency exchange rates. Excluding this negative impact, earnings per share on a non-GAAP basis is expected to increase 13 percent to 15 percent compared to earnings per share of 7.05 dollars on a non-GAAP basis in 2015. Revenue is currently projected to increase approximately 2 percent on both a constant currency and a GAAP basis as compared to 2015. As such, the Company expects a revenue reduction of approximately 55 million dollars compared to previous guidance, which will impact the second half of the year, primarily in the Calvin Klein business. It is currently projected that revenue for the Calvin Klein business will increase approximately 5 percent on a constant currency basis and about 4 percent on a GAAP basis. Revenue for the Tommy Hilfiger business is expected to increase approximately 5 percent on a constant currency basis and 4 percent on a GAAP basis. Revenue for the Heritage Brands business is expected to decrease approximately 8 percent on a GAAP basis.

For the second quarter, the company currently expects its earnings per share results will be negatively impacted compared to the second quarter of 2015 by approximately 0.45 dollar per share attributable to foreign currency exchange rates. Second quarter earnings per share is currently projected to be in a range of 1.25 dollars to 1.30 dollars on a non-GAAP basis. Earnings per share are expected to increase 24 percent to 28 percent on a non-GAAP basis. Revenue is currently projected to increase approximately 5 percent on a constant currency basis and approximately 4 percent on a GAAP basis.

Revenue for the Calvin Klein business is projected to increase approximately 13 percent on a constant currency basis and about 11 percent on a GAAP basis. Revenue for the Tommy Hilfiger business is currently projected to increase approximately 7 percent on a constant currency basis and about 6 percent on a GAAP basis. Revenue for the Heritage Brands business is currently projected to decrease approximately 12 percent on a GAAP basis.

picture:pvh.com

 

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