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PVH beats Q3 non-GAAP earnings guidance, revenue up 4 percent

By Prachi Singh

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Management

Third quarter revenue at PVH increased 4 percent compared to the prior year period. EPS on a GAAP basis was 1.56 dollars compared to guidance of 2.30 dollars to 2.35 dollars, while EPS on a non-GAAP basis was 2.60 dollars, which the company said, exceeded guidance of 2.35 dollars to 2.40 dollars and included a 0.46 dollar per share negative impact compared to the prior year period related to foreign currency exchange rates.

Commenting on these results, Emanuel Chirico, Chairman and Chief Executive Officer, noted in a statement, “We are very pleased with our strong performance in the third quarter, which exceeded our guidance on a non-GAAP basis despite the volatile macroeconomic environment. We continue to over deliver against our 2016 plan, driven in large part by strong momentum across our Calvin Klein and Tommy Hilfiger International businesses. We have not experienced any significant improvement in traffic and consumer spending trends across our Tommy Hilfiger and Calvin Klein U.S. outlet stores located in international tourist locations.”

PVH raises full year EPS guidance on non-GAAP basis

Full year EPS guidance on a GAAP basis is now projected to be in a range of 6.51 dollars to 6.56 dollars compared to previous guidance of 7.50 dollars to 7.60 dollars, while EPS guidance on a non-GAAP basis has been raised to a range of 6.70 dollars to 6.75 dollars including a negative impact of approximately 1.65 dollars per share related to foreign currency exchange rates. Previous guidance was 6.55 dollars to 6.65 dollars, which included 1.60 dollars per share negative impact related to foreign currency exchange rates.

“Although we are increasing our non-GAAP earnings guidance for the year, we continue to take a prudent approach to planning the holiday season in light of the macroeconomic and geopolitical volatility around the world, as well as the strengthening dollar in the wake of the US Presidential election,” added Chirico.

Revenue in 2016 is currently projected to increase approximately 2 percent or around 3 percent on a constant currency basis as compared to 2015. It is currently projected that revenue for the Calvin Klein business will increase approximately 6 percent or 8 percent on a constant currency basis and revenue for the Tommy Hilfiger to increase approximately 4 percent or 5 percent on a constant currency basis. Revenue for the Heritage Brands business is currently projected to decrease approximately 9 percent.

Fourth quarter 2016 earnings per share on a GAAP basis is currently projected to be in a range of 0.99 dollar to 1.04 dollars compared to 1.63 dollars in the prior year period and on non-GAAP basis, earning will be in a range of 1.13 dollars to 1.18 dollars compared to 1.52 dollars in the prior year period. Revenue is currently projected to decrease approximately 1 percent or increase approximately 1 percent on a constant currency basis compared to the prior year period.

Third quarter business segment review

Revenue in the Calvin Klein business for the quarter increased 9 percent to 891 million dollars or increased 10 percent on a constant currency basis compared to the prior year period. Calvin Klein international revenue increased 16 percent to 389 million dollars and increased 17 percent on a constant currency basis, including a 7 percent increase in comparable store sales. PVH said, Europe and China continued to demonstrate the strongest performance.

Calvin Klein North America revenue increased 5 percent to 502 million dollars and increased 6 percent on a constant currency basis compared to the prior year period primarily driven by continued healthy growth in the wholesale business. North America retail revenue was flat compared to the prior year period, as square footage expansion in company-operated stores was offset by a 5 percent comparable store sales decline driven by continued weakness in traffic and consumer spending trends in Calvin Klein’s US stores located in international tourist locations.

EBIT on a GAAP basis for the quarter decreased to 69 million dollars, compared to 142 million dollars in the prior year period. Earnings before interest and taxes on a non-GAAP basis for the quarter decreased to 146 million dollars, inclusive of a 16 million dollars negative impact due to foreign currency exchange rates, compared to 148 million dollars in the prior year period.

Revenue in the Tommy Hilfiger business increased 4 percent to 927 million dollars and increased 6 percent on a constant currency basis compared to the prior year period. Tommy Hilfiger international revenue increased 16 percent to 525 million dollars and increased 18 percent on a constant currency basis. This increase, the company said, was driven by continued strong growth in Europe, including a 10 percent increase in comparable store sales, and the company’s April 2016 acquisition of the 55 percent interest in its joint venture for Tommy Hilfiger in China.

Tommy Hilfiger North America revenue decreased 7 percent to 402 million dollars, also decreased 7 percent on a constant currency basis due to an 11 percent comparable store sales decline. EBIT on a GAAP basis for the quarter decreased to 116 million dollars compared to 126 million dollars in the prior year period. EBIT on a non-GAAP basis decreased to 117 million dollars, inclusive of a 24 million dollars negative impact due to foreign currency exchange rates.

Revenue in the Heritage Brands business decreased 8 percent to 426 million dollars compared to the prior year period. Partially offsetting these decreases was a 6 percent increase in comparable store sales in the Van Heusen business. EBIT on a GAAP basis for the quarter increased to 44 million dollars compared to 26 million dollars in the prior year.

Nine months consolidated results

Earnings per share were 5.52 dollars on a GAAP basis for the first nine months of 2016 compared to 5.26 dollars in the prior year period. Earnings per share were 5.57 dollars on a non-GAAP basis compared to 5.53 dollars in the prior year period. Earnings on both a GAAP and non-GAAP basis included 1.42 dollars negative impact related to foreign currency exchange rates.

Revenue for the period increased 3 percent to 6.10 billion dollars or 4 percent on a constant currency basis compared to the prior year period. PVH said, the revenue change was due to an 11 percent or 13 percent increase on a constant currency basis in the Calvin Klein business driven by significant growth in Europe, China and the North America wholesale business. International retail comparable store sales increased 7 percent, while North America retail comparable store sales decreased 4 percent.

The company reported, 5 percent or 6 percent increase on a constant currency basis in the Tommy Hilfiger business compared to the prior year period, driven principally by strong growth across Europe, including a 9 percent increase in comparable store sales, and the TH China acquisition, which was completed in April 2016. In the Tommy Hilfiger North America business, wholesale growth was more than offset by a 9 percent decline in comparable store sales compared to the prior year period. Heritage Brands witnessed an 11 percent decrease, driven principally by the rationalization initiatives in the business, partially offset by a 9 percent increase in comparable store sales in the Van Heusen business.

Picture:Facebook/Calvin Klein

PVH