New York–Philips-Van Heusen Corp. (PVH) swung into a second quarter profit as the company reported Tuesday better than expected results for the period, including strong growth in its Tommy Hilfiger and Calvin Klein brands.
Net income reached $66.7 million, or 92 cents a share, compared with a loss of $70.6 million, or $1.07 a share, in the year ago. Excluding items, the company earned $1.07 per share.
Net sales were up 21% to $1.33 billion, up from $1.10 in the prior year quarter.
Analysts’ average estimate expected earnings of 95 cents a share on sales of $1.28 billion.
Calvin Klein recorded a 19% revenue increase to reach $239.9 million, with comparable-store sales “outperforming” expectations, rising 21% increase over the period. Royalty revenue was up 12% on the previous year, driven by a continued strong performance across all product categories and regions.
Manny Chirico, chairman /ceo, told analysts in a conference call on Wednesday that the Calvin Klein footwear business was “running over 25% ahead” in North America. “In addition, our new handbag and accessory business is off to a very strong start exceeding our expectations and our plans. G3 has seen excellent placement and sell-through both at Lord & Taylor’s and at Macy’s and we think the footwear accessory area will continue to be a growth area for Calvin Klein. The balance of this year into the next couple of years, we see real opportunity there.”
‘Entering Fall Poised for Growth’
Revenue at Tommy Hilfiger business exceeded the top end of its guidance, up 30% to $692.9 million. The company attributed the increase to growth in the European wholesale division, combined with “strong” comparable-store sales growth of 13% in North America and 12% internationally.
On a non-GAAP basis, EBIT for Tommy Hilfiger was up 34% to $75.6 million, driven by revenue growth combined with operating synergies relating to its integration into PVH. However, this growth was partially offset by gross margin pressures and a $10 million rise in advertising spend over the quarter.
Revenue in the Heritage Brands business was up 9% to $401.7 million, driven by 14% growth in its wholesale business. EBIT fell in the division to $30.2 million from $30 million in the same period as it was hit by declining margins due to higher product costs and increased promotional selling.
The company is forecasting that full-year revenue will reach $5.7 billion to $5.8 billion an increase of 25-26% on the previous year. Revenue for the Calvin Klein business is forecast to grow between 12-13%, while revenue in the Heritage Brands division is planned to grow 2% over the year.
“Despite the uncertainty that has been impacting the overall market environment, we are optimistic that the strength of our brands, led by Calvin Klein and Tommy Hilfiger, will continue to generate solid revenue and profitability increases,” Chirico said.
“We are entering the fall selling season poised for this growth, as we maintain our disciplined approach to dealing with the volatile market conditions, as well as product cost increases that have been impacting our industry, through product sourcing and investments in product design, strategic retail price increases, and prudent inventory and logistics planning.”