PVH Q4 earnings up, projects positive outlook

PVH fourth quarter earnings per share were 1.52 dollars on a non-GAAP basis, inclusive of a 0.36 dollar negative impact. Earnings per share on a non-GAAP basis excluding such negative impact were 1.88 dollars, or an increase of 7 percent. Earnings per share were 1.63 dollars on a GAAP basis compared to 0.62 dollar for the prior year’s fourth quarter. Earnings per share for the full year were 7.05 dollars on a non-GAAP basis. Earnings per share on a non-GAAP basis excluding such negative impact were 8.43 dollars, or an increase of 15 percent. GAAP earnings per share were 6.89 dollars compared to 5.27 dollars in the prior year.

Commenting on these results, Emanuel Chirico, Chairman and Chief Executive Officer, noted, “We are very pleased with our fourth quarter and full year 2015 results, which exceeded our expectations despite the difficult macroeconomic environment and the highly promotional retail market in the US. We grew 2015 annual earnings per share 15 percent on a non-GAAP and constant currency basis, consistent with our long-term targets. Our Calvin Klein business was a highlight and our Tommy Hilfiger business also saw positive momentum in its international markets. Lastly, our Heritage Brands business produced a notable improvement in profitability.”

Fourth quarter business review

Revenue increased 7 percent on a constant currency basis and increased 2 percent on a GAAP basis to 2.11 billion dollars. As compared to the prior year’s fourth quarter, revenue increased 21 percent in the Calvin Klein business on a constant currency basis and increased 15 percent on a GAAP basis; increased 5 percent in the Tommy Hilfiger business on a constant currency basis but decreased 2 percent on a GAAP basis; and decreased 10 percent in the Heritage Brands business on a GAAP basis, driven primarily by the exit from the Izod retail business.

Calvin Klein North America revenue increased 22 percent on a constant currency basis and 18 percent on a GAAP basis driven by growth of over 20 percent in the North America wholesale business due in large part to continued strength in underwear. Calvin Klein International revenue increased 21percent on a constant currency basis and increased 10 percent on a GAAP basis, including a retail comparable store sales increase of 6 percent. The increase was driven by strong growth in Europe and China, partially due to the benefit of the Chinese New Year, as the fourth quarter of 2015 included the peak wholesale selling season before the Chinese New Year, partially offset by continued softness in Korea and Hong Kong, as well as a decline in Brazil.

Revenue in the Tommy Hilfiger business for the quarter increased 5 percent on a constant currency basis and decreased 2 percent on a GAAP basis from 919 million dollars in the prior year’s fourth quarter. Tommy Hilfiger North America revenue increased 1 percent on a constant currency basis and decreased 1 percent on a GAAP basis, as growth in the wholesale business was mostly offset by softness in the retail business. North America retail comparable store sales declined 7 percent. Tommy Hilfiger International revenue increased 8 percent on a constant currency basis and decreased 2 percent on a GAAP basis, driven by continued strong performance in most European markets, including a 10 percent increase in retail comparable store sales and healthy growth in the wholesale business on a constant currency basis for the region.

Revenue in the Heritage Brands business for the quarter decreased 10 percent 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, partially offset by an 8 percent increase in comparable store sales in the Van Heusen retail business.

Full year consolidated results

Revenue increased 4 percent on a constant currency basis and decreased 3 percent on a GAAP basis compared to 8.24 billion dollars in the prior year. The revenue change was due to a 9 percent increase on a constant currency basis and 2 percent increase on a GAAP basis in the Calvin Klein business, driven by strong momentum globally. Retail comparable store sales increased 2 percent in North America and increased 5 percent internationally. The increase in international retail comparable store sales was due in large part to growth in most European markets, as well as an increase in China.

A 4 percent increase on a constant currency basis or 6 percent decrease on a GAAP basis was reported by Tommy Hilfiger business compared to the prior year. Tommy Hilfiger North America revenue increased 1 percent on a constant currency basis and decreased 1 percent on a GAAP basis primarily due to mid-single digit percentage wholesale growth on a constant currency basis, partially offset by a 5 percent decrease in retail comparable store sales. Tommy Hilfiger International revenue increased 5 percent on a constant currency basis and decreased 10 percent on a GAAP basis, driven principally by 8 percent retail comparable store sales growth in Europe and mid-single digit percentage wholesale growth on a constant currency basis.

A 4 percent decrease in the Heritage Brands business compared to the prior year, as a 10 percent comparable store sales increase in the Van Heusen retail business was more than offset by the revenue decrease attributable to the exit from the Izod retail business and the discontinuation of several licensed product lines in the dress furnishings business.

2016 guidance projects rise in earnings

The company currently expects its full year 2016 earnings per share results will be negatively impacted compared to 2015 by approximately 1.60 dollars per share attributable to foreign currency exchange rates due to the stronger US dollar against other currencies in which the company transacts significant levels of business. The company currently projects that 2016 earnings per share will be in a range of 6.30 dollars to 6.50 dollars on a non-GAAP basis, which includes approximately 1.60 dollars per share negative impact related to foreign currency exchange rates. Excluding this negative impact, earnings per share on a non-GAAP basis is expected to increase 12 percent to 15 percent.

Revenue in 2016 is currently projected to increase approximately 2 percent on a constant currency basis and approximately 1percent on a GAAP basis as compared to 2015. It is currently projected that revenue for the Calvin Klein business will increase approximately 6 percent on a constant currency basis and increase approximately 4 percent on a GAAP basis. Revenue for the Tommy Hilfiger business is currently projected to increase approximately 3 percent on a constant currency basis and increase approximately 2 percent on a GAAP basis.

Revenue for the Heritage Brands business is currently projected to decrease approximately 7 percent on a GAAP basis principally due to the continued rationalization of the business, including the loss of revenue from the Izod retail business and from several licensed product lines in the dress furnishings business that were discontinued in 2015 or will be discontinued in 2016.

The company currently expects its first quarter 2016 earnings per share results will be negatively impacted by approximately 0.50 dollar per share attributable to foreign currency exchange rates due to the stronger US dollar against other currencies in which the company transacts significant levels of business. Earnings per share is currently projected to be in a range of 1.40 dollars to 1.45 dollars on a non-GAAP basis, which includes approximately 0.50 dollar per share negative impact related to foreign currency exchange rates. Excluding this negative impact, earnings per share is expected to increase 27 percent to 30 percent on a non-GAAP basis.

Revenue in the first quarter is currently projected to increase approximately 3 percent on a constant currency basis and increase approximately 1percent on a GAAP basis compared to the first quarter of 2015. Revenue for the Calvin Klein business in the first quarter is currently projected to increase approximately 12 percent on a constant currency basis or increase approximately 8 percent on a GAAP basis.

Revenue for the Tommy Hilfiger business in the first quarter is currently projected to increase approximately 2 percent on a constant currency basis and increase approximately 1percent on a GAAP basis. Revenue for the Heritage Brands business is currently projected to decrease approximately 9 percent on a GAAP basis principally due to the continued rationalization of the business.