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current news

PVH: Q2 Sales Up 4.5%, Income Down 11.4%


Calvin Klein seamless logo underwear.
Calvin Klein seamless logo underwear.

(Filed Under wholesale Lingerie News). PVH second quarter sales rose 4.5% while net income fell 11.4%. Emanuel Chirico, chairman and CEO complained, “we continue to be pressured by weakness in traffic and consumer spending trends at our Tommy Hilfiger and Calvin Klein U.S. stores located in international tourist locations.”

Other parts of the company, which acquired Warnaco four years ago, are doing better. “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.”

In the quarter ended July 31, 2016 the company reported a profit of $90.5 million on sales of $1.845 billion compared to net income of $102.2 million on sales of $1.766 billion for the three months ended August 2, 2015.

PVH operates in a range of apparel categories, but in the conference call with analysts to discuss the quarter, Chirico pointed to particular strength in undergarments. “As a product category, we have seen significant growth in our Calvin Klein underwear and intimates business. And this is far and away been our most successful growth category, posting explosive growth and consistently growing its leading global market share position. We believe women’s intimates will continue to be our most significant growth area and we have a number of fall growth initiatives taking place.”

He continued, “Our Modern Cotton logo business continues to gain momentum and has enabled us to capture the number one market position in the bra-led category. For fall 2016, we are taking this logo application to tailored bras and are launching our seamless [logo bra]. It marries bra technology with a great CK logo. This will allow us to continue to cater to a younger consumer and offer those that want more support the ability to purchase logo product as well. Additionally on the bra side, we continue to expand our Black Label offering, particularly in Asia and Europe, and have launched two new products for fall to address our broader tailored bra segment, offering seductive comfort with lace, adding new fashion details to our well-known proven seductive comfort silhouette, and offering a three-piece lace bra with a focus on our attempt to gain a larger portion the large size cup market both in US and in Europe markets.”

Later in the same call Chirico added, speaking about the company’s Calvin Klein, North American wholesale operations, “During the quarter, we saw continued momentum in our underwear business, as our women’s business continued to see tremendous growth and market share gains in the department store sector. We’ve seen market share grow in the bra business to the number five position overall in department stores and number one position in the bralette category. We also have grown to the number two position in panties with strong momentum in the logo bottoms business. In men’s, we continue to hold the number one market share position in bottoms and the number two position in tops.”

He continued, “Our newest launch in bottoms in the US is the 3-pack micro, which is off to a strong start. Historically, we have not offered micro product in multipacks, but only in singles, and the consumers reacted very positively to this. While the department stores continue to drive the lion’s share of our volume growth, penetration of our e-commerce and growth in these channels continues to outpace the brick-and-mortar trends.”

Chirico made an unusual reference to a store by name in the call: “Let’s start with the Macy’s 100-door closure. I think Macy’s spoke to it as a net impact of about $1 billion. I think it’ll be relatively immaterial to our top line as we move forward as that happens over a period of time. I think it may put a little bit of pressure on top line, but from a profitability point of view, these obviously weren’t Macy’s most profitable stores and they weren’t our most profitable margin stores. So I think the opportunity is to have a healthier presentation and healthier profitability in the brick-and-mortar side of the business.”

PVH’s reviewed its overall performance by brand in a release that was presented with the financial results. “Revenue in the Calvin Klein business for the quarter increased 12% to $726 million on a GAAP basis (increased 15% on a constant currency basis) compared to the prior year period. Calvin Klein North America revenue increased 11% to $398 million on a GAAP basis (increased 12% on a constant currency basis) compared to the prior year period primarily driven by continued 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% comparable store sales decline driven by continued weakness in traffic and consumer spending trends in Calvin Klein’s U.S. stores located in international tourist locations. Calvin Klein International revenue increased 13% to $328 million on a GAAP basis (increased 17% on a constant currency basis) compared to the prior year period, including an 11% increase in comparable store sales. The robust performance was driven by growth across Europe and Asia.”

“Earnings before interest and taxes on a GAAP basis for the quarter increased to $106 million, inclusive of a $15 million negative impact due to foreign currency exchange rates, compared to $81 million in the prior year period. The significant earnings increase was due principally to the revenue increase mentioned above and the favorable impact of a shift of advertising spending into the second half of 2016 from the second quarter when compared to the prior year period.”

The company saw similar second quarter trends at its other main brand. “Revenue in the Tommy Hilfiger business for the quarter increased 6% to $860 million on a GAAP basis (increased 7% on a constant currency basis) compared to the prior year period. Tommy Hilfiger North America revenue increased 3% to $407 million on a GAAP basis (also increased 3% on a constant currency basis) compared to the prior year period, as growth in the wholesale business was partially offset by continued softness in the U.S. retail business. North America comparable store sales declined 7% compared to the prior year period, driven by continued weakness in traffic and consumer spending trends in Tommy Hilfiger’s U.S. stores located in international tourist locations. Tommy Hilfiger International revenue increased 10% to $453 million on a GAAP basis (increased 11% on a constant currency basis) compared to the prior year period, driven by continued strong growth in Europe, including an 8% increase in comparable store sales, and the company’s April 2016 acquisition of the 55% interest in its joint venture for Tommy Hilfiger in China (“TH China”) that it did not already own.”

PVH reported that for the brand, “Earnings before interest and taxes on a GAAP basis for the quarter decreased $22 million to $76 million compared to the prior year period principally due to costs incurred in connection with (i) the TH China acquisition, primarily consisting of noncash valuation adjustments and amortization of short-lived assets, and (ii) the licensing to G-III Apparel Group, Ltd. of the Tommy Hilfiger womenswear wholesale business in the U.S. and Canada.” — NM

The full transcript of the conference call can be found here: http://seekingalpha.com/article/4002158-pvhs-pvh-ceo-manny-chirico-q2-2016-results-earnings-call-transcript?page=1


more wholesale Lingerie News >>

Published 09-06-2016 by Nick Monjo

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