(Filed Under Financial and General Interest News). PVH Corp. lost $20.0 million in its first quarter ended May 5, 2013 on sales of $1.823 billion, compared to a profit $95.5 million on sales of $1.313 billion for the same quarter last year, ended April 29. A company statement said that the loss was “due to significant costs incurred in connection with the company’s acquisition during the quarter" of Warnaco and “with the related integration and restructuring, a significant portion of which was non-cash.”
Emanuel Chirico, PVH chairman and CEO, emphasized that “During the first quarter, we began to make the necessary investments to rebuild Warnaco’s Calvin Klein jeanswear and underwear businesses, which will allow us to capitalize on their long-term growth opportunities.”
The company pointed out that for the first quarter, “Earnings per share was $1.91 on a non-GAAP (generally accepted accounting principles) basis, which significantly exceeded the company’s guidance, as compared to the prior year’s first quarter non-GAAP earnings per share of $1.33.”
Commenting on its Calvin Klein business segment, the firm stated, “Revenue on a non-GAAP basis in the Calvin Klein business increased to $638 million from $262 million in the prior year’s first quarter. $361 million of the increase in revenue was due to the Warnaco acquisition and is net of the reduction in licensing revenue attributable to Warnaco for the prior year. Comparable store sales within the company’s Calvin Klein North America retail business increased 4% despite unseasonably cold weather in March and April. With respect to the Warnaco Calvin Klein jeans and underwear businesses, revenue exceeded the company’s estimate as a result of strong business in China and Brazil, due in part to wholesale shipments planned in the second quarter being accelerated into the first quarter, partially offset by continued weakness in Korea. The European business was on plan with a mid-single digit sales decline due to weakness in jeans, particularly in Spain and Italy where the European business is primarily concentrated and where the company is currently restructuring the distribution mix. Comparable store sales within the Calvin Klein International segment decreased 5%.
“Royalty revenue in the first quarter decreased $22 million from the prior year amount, principally due to the loss of royalties from Warnaco subsequent to the acquisition date and the expiration of a long-term contractual agreement related to royalties in the North American women’s sportswear business. Excluding the expiration of this contract and loss of Warnaco royalties, royalty revenue increased 4% due to strength in handbags and accessories, women’s coats, outerwear and suits.
“GAAP revenue in the current year’s first quarter was $608 million, or $30 million lower than non-GAAP revenue, due to the sales returns mentioned above.
“Earnings before interest and taxes for the Calvin Klein business increased to $106 million on a non-GAAP basis, as compared to $58 million in the prior year’s first quarter (which was in accordance with GAAP), due largely to earnings related to the Calvin Klein businesses acquired from Warnaco and a strong increase in the company’s North America retail business due to the revenue increase mentioned above, combined with improved gross margins.
“On a GAAP basis, earnings before interest and taxes for the Calvin Klein business decreased to a loss of $(36) million, as compared to earnings of $58 million in the prior year’s first quarter. This decrease was due principally to the significant acquisition and integration costs incurred during the first quarter, a significant portion of which was non-cash, partially offset by the net earnings from the acquired businesses noted above.”
Looking at the full year, PVH noted that “Despite the strong tone of business that led to the company’s outperformance in the first quarter, the company believes it is premature to adjust its full year earnings guidance, given the short amount of time that has passed since closing the Warnaco acquisition and the complexity of the integration. The company continues to project that revenue in 2013 will be approximately $8.2 billion.”
The company report continued, “Revenue for the Calvin Klein business in 2013 on a non-GAAP basis is projected to increase to approximately $2.75 billion as compared to the 2012 amount of $1.15 billion, principally due to the Warnaco jeans and underwear businesses. Revenue for the Tommy Hilfiger business in 2013 is expected to be approximately $3.40 billion as compared to the 2012 amount of $3.22 billion. Revenue for the Heritage Brands business in 2013 is projected to increase to approximately $2.05 billion as compared to the 2012 amount of $1.68 billion due principally to the addition of revenue related to the newly acquired Speedo swimwear and Warner’s and Olga women’s intimate apparel businesses.
“The company continues to project that non-GAAP earnings per share will be approximately $7.00, as compared to the $6.58 in 2012.”
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