Actionable news
0
All posts from Actionable news
Actionable news in PVH: PVH Corp,

PVH: Treasurer And Senior Vice President, Business Development And Investor Relations

The following excerpt is from the company's SEC filing.

(212) 381-3502

investorrelations@pvh.com

PVH CORP. REPORTS 2015 THIRD QUARTER NON-GAAP EPS ABOVE GUIDANCE AND MAINTAINS FULL YEAR NON-GAAP EPS GUIDANCE

THIRD QUARTER EPS ON A NON-GAAP BASIS OF $2.66 EXCEEDED PREVIOUS GUIDANCE OF $2.45 to $2.50; GAAP EPS WAS $2.67

THE COMPANY MAINTAINS FULL YEAR EPS GUIDANCE OF $6.90 TO $7.00 ON A NON-GAAP BASIS

2015 THIRD QUARTER EPS AND FULL YEAR EPS GUIDANCE ON A NON-GAAP BASIS INCLUDE A NEGATIVE IMPACT OF $0.44 AND $1.35, RESPECTIVELY, PRIMARILY RELATED TO FOREIGN CURRENCY EXCHANGE RATES

New York, New York

PVH Corp. [NYSE: PVH] reported 2015 third quarter results.

Non-GAAP Amounts:

Non-GAAP amounts discussed in this release exclude the items that are described in this release under the heading “Non-GAAP Exclusions.” Amounts stated on a constant currency basis are also considered to be non-GAAP measures. Reconciliations of GAAP to non-GAAP amounts are presented later in this release and identify and quantify all excluded items.

Overview of Third Quarter Results:

Earnings per share on a non-GAAP basis was $2.66, inclusive of a $0.44 negative impact compared to the prior year primarily related to foreign currency exchange rates. Earnings per share on a non-GAAP basis excluding the negative impact primarily related to foreign currency exchange rates was $3.10, or an increase of 21% compared to the prior year’s third quarter earnings per share on a non-GAAP basis of $2.56.

GAAP earnings per share was $2.67 compared to $2.71 for the prior year’s third quarter.

Revenue increased 3% on a constant currency basis (decreased 3% on a GAAP basis to $2.16 billion) compared to the prior year’s third quarter revenue of $2.23 billion. As compared to the prior year’s third quarter, revenue increased 7% in the Calvin Klein business on a constant currency basis (was flat on a GAAP basis); increased 4% in the Tommy Hilfiger business on a constant currency basis (decreased 5% on a GAAP basis); and decreased 5% in the Heritage Brands business on a GAAP basis.

CEO Comments:

Commenting on these results, Emanuel Chirico, Chairman and Chief Executive Officer, noted, “We are very pleased with our third quarter results, which exceeded our expectations despite the difficult and volatile market environment, including the slowdown in traffic experienced in the U.S. during the quarter. Our results continued to highlight the strength of our Calvin Klein and Tommy Hilfiger International businesses and improving trends in our Heritage Brands business. The U.S. market during the second half of the quarter and currently in the fourth quarter continues to experience increased softness in traffic trends, in large part driven by the decline in international tourist traffic and spending trends coupled with unseasonably warm weather.”

Mr. Chirico continued, “Despite our better than expected third quarter results, we believe the current holiday season will continue to be very competitive and highly promotional and the volatility we are experiencing in the global environment will remain a headwind for the remainder of the year and into 2016. As a result, we believe it is prudent to maintain our full year earnings per share guidance of $6.90 to $7.00 on a non-GAAP basis.”

Mr. Chirico concluded, “While the global retail landscape continues to be uncertain with foreign currency exchange rates and global consumer spending remaining unpredictable and volatile, we believe that through the power of our designer lifestyle brands,

, we can successfully navigate this uncertain environment. We remain focused on the strategic growth opportunities ahead of us and believe the sound execution of our business strategies and investment in our world-class brands, together with our strong balance sheet and the efforts of our dedicated and talented associates, will position us to deliver long-term growth and stockholder value.”

Third Quarter Business Review:

Revenue in the Calvin Klein business for the quarter increased 7% on a constant currency basis (was flat on a GAAP basis) from $816 million in the prior year’s third quarter. Calvin Klein North America revenue increased 7% on a constant currency basis (increased 4% on a GAAP basis) compared to the third quarter of 2014. The North America wholesale business experienced healthy growth on a constant currency basis. Revenue growth on a constant currency basis in the North America retail business was due principally to square footage expansion in Company-operated stores, including the conversion of

stores to

Calvin Klein Accessory

Calvin Klein Underwear

stores. North America retail comparable store sales decreased 3% as compared to the prior year’s third quarter, primarily as a result of both the continued decline in traffic and consumer spending trends in the Company’s U.S. stores located in international tourist locations and unseasonably warm weather. Calvin Klein International revenue increased 7% on a constant currency basis (decreased 6% on a GAAP basis) from the prior year period. The increase on a constant currency basis was driven by strong momentum in the European and Chinese businesses. Calvin Klein International retail comparable store sales increased 2% as a result of strong performance in Europe and China, partially offset by softness in Korea and Hong Kong.

Earnings before interest and taxes on a non-GAAP basis for the quarter increased to $148 million, inclusive of a $15 million negative impact due to foreign currency exchange rates, as compared to $142 million in the prior year’s third quarter. Earnings on a constant currency basis increased 15% due principally to the constant currency revenue increase mentioned

above, combined with continued gross margin improvements in both Europe and Asia. Third quarter earnings was also positively impacted by the timing of advertising expenses compared to the prior year as a result of a planned shift into the second quarter from the third quarter of 2015.

Earnings before interest and taxes on a GAAP basis for the quarter was $142 million compared to $127 million in the prior year’s third quarter. The increase

was principally driven by a reduction in Warnaco integration and restructuring costs compared to the prior year’s third quarter, combined with the earnings increase on a non-GAAP basis described above.

Revenue in the Tommy Hilfiger business for the quarter increased 4% on a constant currency basis (decreased 5% on a GAAP basis) from $930 million in the prior year’s third quarter. Tommy Hilfiger North America revenue increased 2% on a constant currency basis (was flat on a GAAP basis) compared to the third quarter of 2014, as growth in the wholesale business was mostly offset by softness in the retail business. North America retail comparable store sales declined 7% compared to the prior year’s third quarter due to further deterioration of traffic and consumer spending trends in the Company’s U.S. stores that are highly penetrated in international tourist locations and unseasonably warm weather. Tommy Hilfiger International revenue increased 6% on a constant currency basis (decreased 8% on a GAAP basis) from the prior year period driven by strong performance in the European business, including a 10% increase in retail comparable store sales attributable to growth across all major markets.

Earnings before interest and taxes for the quarter was $126 million on a GAAP basis, inclusive of a $20 million negative impact due to foreign currency exchange rates, compared to $155 million in the prior year’s third quarter. Earnings on a constant currency basis decreased 6% driven principally by an earnings decline in North America due to increasingly weak international tourist traffic and spending in the Company’s U.S. stores and unseasonably warm weather, which both drove more promotional selling as compared to the prior year’s third quarter, resulting in gross margins that were sharply lower than planned. This decline was partially offset by an earnings increase in Tommy Hilfiger International on a constant currency basis driven by the constant currency revenue increase noted above.

Revenue in the Heritage Brands business for the quarter decreased 5% from $487 million in the prior year’s third quarter primarily due to the continued rationalization of the Heritage Brands business, which includes the exit from the Izod retail business and the discontinuation of several licensed product lines in the dress furnishings business, as the Company focuses on its more profitable businesses. Partially offsetting this decrease was an 11% increase in comparable store sales in the Van Heusen retail business as a result of initiatives introduced in 2015.

Earnings before interest and taxes on a non-GAAP basis for the quarter increased to $43 million compared to $36 million in the prior year’s third quarter due principally to an increase in the wholesale business and an improvement in the Van Heusen retail business, combined with the exit from the Izod retail business, which was operating at a loss in the prior year’s third quarter.

Earnings before interest and taxes on a GAAP basis for the quarter was $26 million compared to $32 million in the prior year’s third quarter. The decrease was principally attributable to expenses related to the discontinuation of several licensed product lines in the dress furnishings business and the exit from the Izod retail business, partially offset by a reduction in Warnaco integration and restructuring costs incurred compared to the prior year’s third quarter.

Third Quarter Consolidated Earnings:

Earnings before interest and taxes on a non-GAAP basis for the third quarter increased 5% on a constant currency basis (decreased 7% including foreign currency exchange rate impacts) from $309 million in the prior year’s third quarter. Earnings of the Calvin Klein business grew 15% on a constant currency basis (increased 4% including foreign currency exchange rate impacts) and earnings of the Heritage Brands business grew 18%. These increases were partly offset by a 6% earnings decline in the Tommy Hilfiger business on a constant currency basis (19% decrease including foreign currency exchange rate impacts) and a $4 million increase in corporate expenses mainly attributable to associate-related benefits, primarily pension expense.

Earnings before interest and taxes on a GAAP basis was $254 million compared to $280 million in the prior year’s third quarter. The decrease was primarily due to a negative impact of foreign currency exchange rates and expenses incurred principally in connection with the discontinuation of several licensed product lines in the Heritage Brands dress furnishings business and the operation of and exit from the Izod retail business, partially offset by a reduction in Warnaco integration and restructuring costs incurred compared to the prior year’s third quarter.

Net interest expense decreased to $27 million from $32 million in the prior year’s third quarter due principally to lower average debt balances. The effective tax rate on a non-GAAP basis decreased to 15.3% compared to 23.0% in the prior year’s third quarter. The effective tax rate on a GAAP basis decreased to 1.9% compared to 8.9% in the prior year’s third quarter. The decrease in the effective tax rates is principally attributable to a favorable shift in the mix of earnings between tax jurisdictions and certain favorable discrete items in the third quarter of 2015.

Inventory at the end of the current year’s third quarter increased 7% over the prior year’s third quarter, including an overall cost increase of 4% attributable to U.S. dollar inventory purchases by the Company’s international businesses.

Nine Months Consolidated Results:

Earnings per share on a non-GAAP basis for the first nine months of 2015 was $5.53, inclusive of a $1.02 negative impact compared to the prior year primarily related to foreign currency exchange rates. Earnings per share on a non-GAAP basis excluding the negative impact primarily related to foreign currency exchange rates was $6.55, or an increase of 18% compared to earnings per share on a non-GAAP basis of $5.54 in the prior year period. GAAP earnings per share was $5.26 compared to $4.66 in the prior year period.

Revenue increased 3% on a constant currency basis (decreased 4% on a GAAP basis) compared to $6.17 billion in the prior year period.

The revenue change was due to:

A 5% increase on a constant currency basis (2% decrease on a GAAP basis) in the Calvin Klein business compared to the prior year period, primarily driven by strong performance in Europe and Asia. International retail comparable store sales increased 5%. North America retail comparable store sales were flat to the prior year period primarily as a result of both the decline in traffic and spending trends in the Company’s U.S. stores located in international tourist locations and unseasonably warm weather in the third quarter of the current year.

A 3% increase on a constant currency basis (7% decrease on a GAAP basis) in the Tommy Hilfiger business compared to the prior year period. Tommy Hilfiger North America revenue increased 2% on a constant currency basis (decreased 1% on a GAAP basis) inclusive of a 3% decrease in retail comparable store sales as a result of both the decline in traffic and spending trends in the Company’s U.S. stores located in international tourist locations and unseasonably warm weather in the third quarter of the current year. Tommy Hilfiger International revenue increased 5% on a constant currency basis (decreased 13% on a GAAP basis), driven principally by European retail comparable store sales growth of 7% and low single-digit percentage wholesale growth on a constant currency basis.

A 2% decrease in the Heritage Brands business compared to the prior year period, as an 11% retail comparable store sales increase in the Van Heusen business was more than offset by the revenue decrease attributable to the exit from the Izod retail business, as well as the prior year’s comparable period having the benefit of the sales attributable to the launch of

at Kohl’s.

Earnings before interest and taxes on a non-GAAP basis increased 4% on a constant currency basis (decreased 8% including foreign currency exchange rate impacts) from $718 million in the prior year period. Earnings on a constant currency basis increased 15% in the Calvin Klein business (increased 5% including foreign currency exchange rate impacts) due principally to strength in Europe and Asia. Earnings in the Heritage Brands business increased 9% due principally to an earnings increase in the Van Heusen retail business and the exit from the Izod retail business, which was operating at a loss in the prior year period. Partially offsetting these increases were an earnings decline of 5% on a constant currency basis in

the Tommy Hilfiger business (a decrease of 19% including foreign currency exchange rate impacts) due to weak performance in the Company’s U.S. stores located in international tourist locations, which drove more promotional selling, resulting in lower gross margins, and a $10 million increase in corporate expenses mainly attributable to associate-related benefits, primarily pension expense.

Earnings before interest and taxes on a GAAP basis was $585 million compared to $524 million in the prior year period. The increase was primarily due to the absence in 2015 of $93 million of debt modification and extinguishment costs and a reduction in Warnaco integration and restructuring costs compared to the prior year period, partially offset by the negative impact of foreign currency exchange rates and the continued rationalization of the Heritage Brands business, which includes the discontinuation of several licensed product lines in the dress furnishings business and the exit from the Izod retail business, as the Company focuses on its more profitable businesses.

Net interest expense decreased to $85 million from $107 million in the prior year period due to lower average debt balances and interest rates, combined with the effect of the amendment and restatement of the Company’s credit facility during the first quarter of 2014 and the related redemption of its 7 3/8% senior notes due 2020. Since the Warnaco acquisition, the Company has made repayments of approximately $1.1 billion on its long-term debt.

Stock Repurchase Program:

During the first nine months of 2015, the Company repurchased approximately 0.7 million shares of its common stock for $75 million (approximately 0.6 million shares of its common stock for $60 million in the third quarter) under the $500 million three-year stock repurchase program authorized by the Board of Directors in June 2015. Stock repurchases under this program may be made from time to time over the period through open market purchases, accelerated share repurchase programs, privately negotiated transactions or other methods, as the Company deems appropriate. Purchases are made based on a variety of factors, such as price, corporate requirements and overall market conditions, applicable legal requirements and limitations, restrictions under the Company’s debt arrangements, trading restrictions under the Company’s insider trading policy, and other relevant factors. The stock repurchase

program may be modified, including to increase or decrease the repurchase limitation or extend, suspend, or terminate the program, by the Company at any time, without prior notice.

2015 Guidance:

In light of the recent sales deceleration in the Company’s U.S. stores and its U.S. wholesale customers’ stores, which began in the second half of the third quarter, the Company expects to experience higher levels of promotional activity due to elevated apparel inventory levels across the retail landscape in the fourth quarter 2015 as compared to the prior year. This is in large part driven by unseasonably warm weather during the third quarter and a significant decline in traffic and apparel spending trends from tourists visiting the U.S.

The Company currently expects its full year 2015 earnings per share results to be negatively impacted versus the prior year by (i) approximately $1.25 per share from foreign currency exchange rates due to the significant strengthening of the U.S. dollar against other currencies in which the Company transacts significant levels of business, and (ii) a negative impact of approximately $0.10 per share from the Company’s Russia businesses due to political and economic instability in the region.

Please see the section entitled “Full Year and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” at the end of this release for further detail and...


More