PVH Corp Q1 result beats expectations, raises outlook

Revenue increased 3 percent on a constant currency basis and decreased 4 percent on a GAAP basis in the first quarter at PVH Corp, compared to the prior year’s first quarter revenue of 1.96 billion dollars.

Earnings per share for the quarter were 1.50 dollars on a non-GAAP basis, including 0.27 dollars negative impact primarily related to foreign currency exchange rates compared to the prior year. Earnings per share on a non-GAAP basis excluding the 0.27 dollars negative impact primarily related to foreign currency exchange rates was 1.77 dollars, or an increase of 20 percent. GAAP earnings per share were 1.37 dollars compared to 0.42 dollars for the prior year’s first quarter.

Commenting on the results, Emanuel Chirico, Chairman and Chief Executive Officer, noted, “We are very pleased with our first quarter results, which exceeded our first quarter guidance, driven by the strength of our Calvin Klein business. Strong underlying fundamentals in our international Calvin Klein and Tommy Hilfiger businesses was partially offset by softness in our U.S. Calvin Klein and Tommy Hilfiger businesses, where a strong U.S. dollar negatively impacted international tourist spending.”

Revenue in the Calvin Klein business for the quarter increased 5 percent on a constant currency basis and decreased 2 percent on a GAAP basis from 665 million dollars in the prior year’s first quarter. Calvin Klein North America revenue increased 2 percent on a constant currency basis and was relatively flat on a GAAP basis compared to the prior year’s first quarter. The North America wholesale business experienced overall modest growth. North America retail comparable store sales decreased 1 percent, as the strengthening United States dollar resulted in decreased traffic and spending in U.S. stores located in international tourist locations.

Calvin Klein international revenue increased 8 percent on a constant currency basis and decreased 4 percent on a GAAP basis compared to the prior year, with a 10 percent increase in retail comparable store sales. The international revenue increase on a constant currency basis was driven by strength in Asia, which included a benefit due to the Chinese New Year and Europe, where the company’s repositioning strategy has begun to gain traction. Earnings before interest and taxes on a non-GAAP basis for the quarter increased to 96 million dollars, inclusive of a 7 million dollars negative impact due to foreign currency exchange rates, from 82 million dollars in the prior year’s first quarter. Earnings before interest and taxes on a GAAP basis was 90 million dollars compared to 74 million dollars in the prior year’s first quarter.

Revenue in the Tommy Hilfiger business for the quarter increased 1 percent on a constant currency basis and decreased 11 percent on a GAAP basis from 862 million dollars in the prior year period. Tommy Hilfiger North America revenue decreased 1 percent on a constant currency basis and decreased 2 percent on a GAAP basis compared to the first quarter of 2014 resulting from a 3 percent decrease in retail comparable store sales. Tommy Hilfiger international revenue increased 2 percent on a constant currency basis and decreased 17 percent on a GAAP basis from the prior year period. The increase on a constant currency basis was driven primarily by solid performance in our European business, including a 2 percent increase in retail comparable store sales, partially offset by weakness in Russian business.

Revenue for the Heritage Brands business for the quarter increased 5 percent from 436 million dollars in the prior year’s first quarter. The increase was principally driven by a shift in the timing of wholesale shipments into the first quarter of 2015 from the second quarter and a retail comparable store sales increase of 14 percent in the Van Heusen business. Earnings before interest and taxes on a non-GAAP basis increased to 34 million dollars compared to 29 million dollars in the prior year’s first quarter. Earnings before interest and taxes on a GAAP basis was 30 million dollars compared to 24 million dollars in the prior year’s first quarter.

The company currently expects its full year earnings per share results to be negatively impacted versus the prior year by approximately 1.15 dollars per share from foreign currency exchange rates due to the significant strengthening of the United States dollar against other currencies, volatility in the global macroeconomic environment, particularly with respect to the company’s businesses in Russia. Earnings per share for the full year 2015 are currently projected to be in a range of 6.85 dollars to 6.95 dollars on a non-GAAP basis. Excluding this negative impact, earnings per share on a non-GAAP basis is expected to increase 11 percent to 12 percent versus the prior year’s non-GAAP earnings per share of 7.30 dollars.

Revenue in 2015 is currently projected to increase approximately 3 percent on a constant currency basis and decrease approximately 3 percent on a GAAP basis as compared to 2014. It is currently projected that revenue for the Calvin Klein business will increase approximately 6 percent on a constant currency basis and approximately 1 percent on a GAAP basis. Revenue for the Tommy Hilfiger business is currently expected to increase approximately 3 percent on a constant currency basis and decrease approximately 7 percent on a GAAP basis and revenue for the Heritage Brands business is expected to decrease approximately 3 percent.

Second quarter 2015 earnings per share on a non-GAAP basis is currently projected to be in a range of 1.25 dollars to 1.30 dollars, which reflects an expected 0.30 dollars per share negative impact. Excluding negative impact, earnings per share on a non-GAAP basis are expected to increase 3 percent to 6 percent versus the prior year’s second quarter non-GAAP earnings per share of 1.51 dollars. Revenue in the second quarter of 2015 is currently projected to be relatively flat on a constant currency basis and decrease approximately 8 percent on a GAAP basis compared to the prior year’s second quarter.