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PVH reports 4 percent increase in Q2 revenue

By Prachi Singh

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Management

PVH second quarter revenue increased 4 percent on a GAAP basis and 5 percent on constant currency basis to 1.93 billion dollars compared to the prior year period. Second quarter EPS on a GAAP basis was 1.11 dollars compared to 1.22 dollars in the prior year period. On a non-GAAP basis EPS was 1.47 dollars, which exceeded the company’s previous guidance of 1.25 dollars to 1.30 dollars.

Commenting on these results, Emanuel Chirico, Chairman and CEO, said, “Our strong performance year to date exceeded our expectations and demonstrated our ability to deliver against our 2016 plan, despite the challenging macroeconomic environment. We experienced strong momentum in our Calvin Klein and Tommy Hilfiger International businesses and have seen improvement across our North America wholesale businesses, but we continue to be pressured by weakness in traffic and consumer spending trends at our Tommy Hilfiger and Calvin Klein US stores located in international tourist locations.”

Business segment review of the second quarter

Revenue in the Calvin Klein business for the quarter increased 12 percent to 726 million dollars on a GAAP basis and 15 percent on a constant currency basis compared to the prior year period. Calvin Klein North America revenue increased 11 percent to 398 million dollars on a GAAP basis and 12 percent on a constant currency basis on healthy performance across the North America wholesale businesses. 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.

Calvin Klein International revenue increased 13percent to 328 million dollars on a GAAP basis and 17 percent on a constant currency, including an 11 percent increase in comparable store sales driven by growth across Europe and Asia. EBIT on a GAAP basis increased to 106 million dollars, inclusive of a 15 million dollars negative impact due to foreign currency exchange rates.

Revenue in the Tommy Hilfiger increased 6 percent to 860 million dollars on a GAAP basis and 7 percent on a constant currency. Tommy Hilfiger North America revenue increased 3 percent to 407 million dollars on a GAAP basis and 3 percent on a constant currency, as growth in the wholesale business was partially offset by continued softness in the US retail business. North America comparable store sales declined 7 percent driven by continued weakness in traffic and consumer spending trends in Tommy Hilfiger’s US stores located in international tourist locations.

Tommy Hilfiger international revenue increased 10 percent to 453 million dollars on a GAAP basis and 11 percent on a constant currency, driven by continued strong growth in Europe, including an 8 percent increase in comparable store sales, and the company’s April 2016 acquisition of the 55 percent interest in China JV - TH China. EBIT on a GAAP basis decreased 22 million dollars to 76 million dollars. EBIT on a non-GAAP basis of 97 million dollars was relatively flat compared to the prior year period.

Revenue in the Heritage Brands business decreased 14 percent to 347 million dollars compared to the prior year period. Partially offsetting the decreases was an 11 percent increase in comparable store sales in the Van Heusen business. EBIT on a GAAP basis was12 million dollars compared to 15 million dollars in the prior year period.

Six months consolidated results

Earnings per share was 3.95 dollars on a GAAP basis for the first six months of 2016 compared to 2.59 dollars in the prior year period. Earnings per share was 2.97 dollars on a non-GAAP basis compared to 2.87 dollars in the prior year period. Revenue increased 3 percent on a GAAP basis to 3.85 billion dollars and increased 4 percent on a constant currency basis) compared to the prior year period.

The revenue change was due to an 11 percent increase on a GAAP basis or 14 percent on a constant currency basis) in the Calvin Klein business driven by significant growth in Europe and the North America wholesale business. International retail comparable store sales increased 6 percent but North America retail comparable store sales decreased 4 percent driven by the continued weakness in traffic and consumer spending trends in Calvin Klein’s US stores located in international tourist locations.

A 5 percent increase on a GAAP basis and 6 percent increase on a constant currency basis in the Tommy Hilfiger business was driven principally by strong growth across Europe, including a 9 percent increase in comparable store sales, and the TH China acquisition. In the Tommy Hilfiger North America business, wholesale growth was more than offset by an 8 percent decline in comparable store sales compared to the prior year period, driven by continued weakness in traffic and consumer spending trends in Tommy Hilfiger’s US stores located in international tourist locations.

A 13percent decrease in the Heritage Brands business was partially offset by an 11percent increase in comparable store sales in the Van Heusen business. EBIT on a GAAP basis increased 107 million dollars to 438 million dollars compared to 331 million dollars in the prior year period.

Expects foreign exchange rates to impact earnings

The company currently expects its full year 2016 earnings per share results will be negatively impacted by approximately 1.60 dollars per share attributable to foreign currency exchange rates due to the stronger US dollar. The company currently projects earnings per share on a GAAP basis will be in a range of 7.50 dollars to 7.60 dollars compared to 6.89 dollars in the prior year period. The company expects earnings on a non-GAAP basis will be in a range of 6.55 dollars to 6.65 dollars compared to7.05 dollars in the prior year period.

Revenue is currently projected to increase approximately 2 percent on a GAAP basis and 3 percent on a constant currency basis with 5 percent rise at the Calvin Klein business on a GAAP basis and 7 percent increase on a constant currency basis. Revenue for the Tommy Hilfiger business is currently projected to increase approximately 5 percent on both a GAAP and constant currency basis and revenue for the Heritage Brands business is projected to decrease approximately 8 percent on a GAAP basis.

The company currently expects its third quarter 2016 earnings per share results will be negatively impacted by approximately 0.45 dollar per share related to foreign currency exchange rates due to the stronger US dollar. Third quarter earnings per share on a GAAP basis is currently projected to be in a range of 2.30 dollars to 2.35 dollars compared to 2.67 dollars in the prior year period. On a non-GAAP basis earnings will be in a range of 2.35 dollars to 2.40 dollars compared to 2.66 dollars in the prior year period.

Revenue is currently projected to increase approximately 3 percent on both a GAAP and constant currency basis with Calvin Klein business revenue projected to increase approximately 6 percent on both a GAAP and constant currency basis. Revenue for the Tommy Hilfiger business is currently projected to increase approximately 5 percent on a GAAP basis and 6 percent on a constant currency basis. Revenue for the Heritage Brands business is currently projected to decrease approximately 6 percent on a GAAP basis.

Picture:Calvin Klein Jeans

PVH Corp