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Calvin, Tommy Owner Posts 3Q Loss as Margins Contract

As the consumer continues to tighten purse strings, revenue for the third quarter ended Oct. 30 decreased 2 percent at PVH compared with the prior-year period.

In a Nutshell: PVH Corp., owner of the Calvin Klein and Tommy Hilfiger brands, reported its 2022 third-quarter results on Wednesday and updated its full-year outlook.

For the year, the company projected revenue to be at the top end of previous guidance range, a decrease of approximately 3 percent compared with 2021, inclusive of a 4 percent negative impact related to the exiting of the Heritage Brands Retail business and the impact of the war in Ukraine.

Earnings per share (EPS) is forecast to be approximately $1.37 compared with $13.25 in 2021. The 2022 EPS projections include the estimated negative impacts of about $1.15 per share related to foreign currency translation and 60 cents per share related to the company’s businesses in Russia, Belarus and Ukraine that have been significantly affected by the war in Ukraine, apart from the one-time noncash asset impairments recorded in the second quarter in connection with the decision to exit its Russia business.

For the fourth quarter, revenue is projected to decrease approximately 4 percent compared to the prior year period, including a 2 percent reduction resulting from the impact of the war in Ukraine. EPS is expected to be approximately 45 cents compared to $5.53 in the prior year period.

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“We continue to manage our business in a prudent and disciplined manner and delivered on the commitments we made by relentlessly focusing on improving execution and reducing costs,” Zac Coughlin, chief financial officer, said. “We are doubling down on the PVH+ Plan growth drivers and focusing on what is within our control to drive sustainable growth, generate strong cash flows and deliver shareholder returns.”

Inventory increased 32 percent compared to a year earlier due to a combination of abnormally low inventory levels in the prior-year period, a planned increase in core product to mitigate supply chain and logistics disruptions, and elevated inventory levels in the North America wholesale business due to lower-than-expected demand.

Sales: Revenue for the third quarter ended Oct. 30 decreased 2 percent compared to the prior year period to $2.28 billion, inclusive of a 2 percent reduction resulting from the impact of the war in Ukraine, including closures of company stores in Russia, the cessation of wholesale shipments to Russia and Belarus, and a reduction in wholesale shipments to Ukraine.

Tommy Hilfiger revenue fell 4 percent year over year, while Tommy Hilfiger International revenue decreased 10 percent and Tommy Hilfiger North America revenue increased 12 percent.

Direct-to-Consumer (DTC) revenue fell 5 percent compared to the prior-year period. Wholesale revenue decreased 2 percent, while total digital revenue was down 12 percent year over year. Total Digital includes sales through the company’s digital commerce businesses and sales to the digital businesses of its traditional and pure play wholesale customers. Digital penetration as a percentage of total revenue was approximately 20 percent.

Earnings: The company saw a loss of $186.7 million in the quarter versus net income of $279.7 million in the 2021 period.

EPS for the period was a negative $2.88 compared to EPS of $3.89 in the prior-year period. This included the negative impacts of 35 cents per share related to foreign currency translation and 18 cents per share related to the war in Ukraine.

Gross margin was 55.9 percent compared to 57.7 percent in the prior-year period, as the benefit from price increases was more than offset by higher costs, increased promotional activity and the negative impact of approximately 40 basis points of foreign currency translation.

CEO’s Take: Stefan Larsson, CEO, said: “We are pleased with our third-quarter results as we delivered high single-digit constant currency top-line growth. This was ahead of our expectations, despite having to navigate continuing macroeconomic headwinds. Our strong performance reflects the power of our two global iconic brands, Calvin Klein and Tommy Hilfiger, and the pricing power we are able to achieve by delivering strong hero product, engaging closely with consumers and elevating the customer experience. Our international businesses continued to execute well across both brands, even as macro conditions remain challenging in Europe and Covid impacts continued in Asia.

“In North America, we are encouraged by the positive performance indicators we are seeing, especially how consumers are responding to and engaging with our brands, although we recognize that we are in the early stages of a multi-year journey to unlock this region’s full opportunity,” Larsson added. “Through the PVH+ Plan, we seek to tap into our full potential by focusing on our core strengths and connecting our iconic brands closer to where the consumer is going than any time before. Our goal is to win with the consumer and achieve long-term profitable growth.”