PVH lowers full year revenue and profit outlook

Second quarter revenue at PVH Corp. increased 1 percent or 3 percent on constant currency basis to 2.4 billion dollars compared to the prior year period. PVH said, earnings per share on a GAAP basis were 2.58 dollars compared to 2.12 dollars in the prior year period, while earnings per share on a non-GAAP basis were 2.10 dollars compared to 2.18 dollars in the prior year period. Earnings before interest and taxes on a GAAP basis for the quarter increased to 250 million dollars, while earnings before interest and taxes on a non-GAAP basis decreased to 232 million dollars compared to 238 million dollars in the prior year period. The company added that its revised 2019 guidance, specifically, the reductions in revenue and margins reflect the trade tensions between the U.S. and China, the ongoing protests in Hong Kong and the increasingly promotional U.S. retail environment.

Commenting on these results, Emanuel Chirico, the company’s Chairman and Chief Executive Officer, noted in a statement: “Our businesses in North America and across China experienced weak traffic trends, including the impact of protests in Hong Kong, resulting in a more promotional environment. We lowered our annual revenue and EPS outlook based on our current trends and our expectation that the volatility in the macro environment, the global retail landscape and the continuing escalation of the trade tensions between the US and China will cause our business to remain under pressure, as will the ongoing impact of protests in Hong Kong.”

Performance of core brands under PVH portfolio

Revenue in the Tommy Hilfiger business for the quarter increased 8 percent or 10 percent on constant currency to 1.1 billion dollars. Tommy Hilfiger International revenue increased 18 percent or 22 percent on a constant currency to 697 million dollars, driven by outperformance experienced in Europe and the addition of revenue resulting from the Australia acquisition. International comparable store sales increased 9 percent. Tommy Hilfiger North America revenue decreased 5 percent on both current and constant exchange to 413 million dollars, driven by an 8 percent decline in North America comparable store sales.

Earnings before interest and taxes on a GAAP basis increased to 148 million dollars, while earnings before interest and taxes on a non-GAAP basis for the quarter increased to 158 million dollars.

Revenue in the Calvin Klein business for the quarter decreased 6 percent or 4 percent on a constant currency to 873 million dollars. Calvin Klein International revenue increased 1 percent or 5 percent on constant currency to 465 million dollars driven by continued growth in Europe and revenue from the Australia acquisition, partially offset by a reduction of revenue as a result of the CK Collection closure and softness experienced across China. International comparable store sales were flat. Calvin Klein North America revenue decreased 13 percent or 12 percent on constant currency to 409 million dollars due to the effect of the G-III license and a 3 percent decline in North America comparable store sales.

Earnings before interest and taxes on a GAAP basis for the quarter decreased to 18 million dollars, while earnings before interest and taxes on a non-GAAP basis decreased to 101 million dollars.

Revenue in the Heritage Brands business of 381 million dollars was flat compared to the prior year period and comparable store sales declined 2 percent. Earnings before interest and taxes on a GAAP basis decreased to 17 million dollars from 33 million dollars in the prior year period.

Review of PVH’s six months performance

Revenue for the first six months of 2019 increased 2 percent or 5 percent to 4.7 billion dollars due to a 6 percent or 10 percent increase on constant currency in the Tommy Hilfiger business driven by outperformance in Europe and the addition of revenue resulting from the Australia acquisition, while international comparable store sales increased 9 percent and North America comparable store sales decreased 6 percent, a 3 percent decrease in the Calvin Klein business, while international comparable store sales decreased 2 percent and North America comparable store sales decreased 4 percent and a 1 percent increase in the Heritage Brands business compared to the prior year period with comparable store sales decrease of 4 percent.

Earnings per share on a GAAP basis was 3.65 dollars for the first six months compared to 4.42 dollars in the prior year period, while earnings per share on a non-GAAP basis were 4.56 dollars compared to 4.55 dollars in the prior year period. Earnings before interest and taxes on a GAAP basis for the first six months decreased to 385 million dollars, and earnings before interest and taxes on a non-GAAP basis were 499 million dollars.

PVH cuts full year earnings outlook

The company currently projects that 2019 earnings per share on a GAAP basis will be in a range of 7.95 dollars to 8.05 dollars compared to 9.65 dollars in 2018, while on a non-GAAP basis, earning are expected to be in a range of 9.30 dollars to 9.40 dollars compared to 9.60 dollars in 2018. Both the GAAP and non-GAAP projections include the estimated negative impact of approximately 35 cents per share related to foreign currency translation. Revenue is projected to increase approximately 1 percent or around 3 percent on a constant currency basis. Revenue for the Tommy Hilfiger business is projected to increase approximately 5 percent and approximately 8 percent on a constant currency basis, for the Calvin Klein business, to decrease approximately 2 percent and flat on a constant currency basis, while revenue for the Heritage Brands business is projected to decrease approximately 1 percent.

The company currently projects that third quarter earnings per share on a GAAP basis will be in a range of 2.70 dollars to 2.75 dollars compared to 3.15 dollars in the prior year period, while earnings per share on a non-GAAP basis are expected to be in a range of 2.95 dollars to 3 dollars compared to 3.21 dollars in the prior year period. Both the GAAP and non-GAAP projections include an estimated negative impact of approximately 9 cents per share related to foreign currency translation. Revenue is projected to increase approximately 1 percent or approximately 3 percent on a constant currency basis. Revenue for the Tommy Hilfiger business is projected to increase approximately 5 percent or approximately 8 percent on a constant currency basis, for the Calvin Klein business, to be flat and increase approximately 2 percent on a constant currency basis and for the Heritage Brands business to decrease approximately 10 percent.

Picture: Facebook/Tommy Hilfiger