PVH reported a 16 percent revenue rise in the fourth quarter to $2.43 billion, despite continued supply chain and logistics disruptions.
In a Nutshell: PVH Corp., owner of the Calvin Klein and Tommy Hilfiger brands, in reporting 2021 fourth quarter and full year results, announced its 2022 outlook, including a projected revenue increase of 2 percent to 3 percent compared to 2021.
This is a 2 percent reduction resulting from the exit from the Heritage Brands retail business and from the company’s decision to temporarily close its stores and pause commercial activities in Russia and Belarus, as well as a reduction in wholesale shipments to Ukraine as a result of the war.
The company expects an operating margin of approximately 10 percent and earnings per share (EPS) of about $9.00 compared to $13.25 in 2021. The company currently expects 2022 EPS will be negatively impacted by approximately 70 cents per share related to foreign currency translation, primarily due to the stronger U.S. dollar against the euro, and about 65 cents per share related to the temporary closure of stores and pause of commercial activities in Russia and Belarus, as well as the reduction in wholesale shipments to Ukraine resulting from the war.
For similar reasons, first quarter guidance sees revenue to be relatively flat compared to the prior year period and EPS in a range of $1.55 to $1.60 compared to $1.38 in the prior-year period.
PVH said it was providing its 2022 outlook despite the significant uncertainty due to the war in Ukraine and its broader macroeconomic implications, inflationary pressures globally, as well as the continued uncertainty due to the Covid-19 pandemic. In addition, supply chain and logistics disruptions globally have resulted in and are expected to continue to result in delivery delays to wholesale customers and delayed inventory availability for the company’s stores and digital commerce businesses.
Inventory levels were down 5 percent in 2021 from a year earlier due in part to the exit from the Heritage Brands retail business. In-transit inventory levels in the quarter increased over 30 percent compared to the prior-year period, primarily due to ongoing supply chain and logistics disruptions.
Sales: Revenue for the fourth quarter ended Jan. 30 increased 16 percent compared to the prior-year period to $2.43 billion, despite continued supply chain and logistics disruptions and the ongoing impacts of the Covid-19 pandemic, particularly the Omicron variant, and reflected strong performance in the company’s international businesses, primarily driven by Europe.
The revenue increase reflects an 18 percent improvement in the Tommy Hilfiger business, including a 20 percent gain in Tommy Hilfiger International and a 14 percent rise in Tommy Hilfiger North America, as well as a 27 percent increase in the Calvin Klein business, including a 24 percent rise in Calvin Klein International and a 32 percent gain in Calvin Klein North America.
Revenue through digital channels grew approximately 10 percent. Revenue in the fourth quarter also reflected a 5 percent reduction from the Heritage Brands transaction and the exit from the Heritage Brands retail business. The prior year period was negatively impacted by extensive temporary store closures, with approximately 70 percent of the company’s stores in Europe and 75 percent in Canada as a result of the pandemic.
Total direct-to-consumer revenue for the quarter rose 13 percent compared to the prior-year period, inclusive of a 4 percent reduction from the exit of the Heritage Brands retail business. Directly operated digital commerce was flat to the exceptionally strong performance of 68 percent growth in the prior year.
Wholesale revenue increased 20 percent year over year and included the favorable impact of the shift in the timing of U.S. wholesale shipments from the third quarter into the fourth quarter as a result of logistics disruptions in October, partially offset by the impact of the Heritage Brands transaction. The company’s sales to the digital businesses of its traditional and pure play wholesale customers continued to exhibit double digit growth.
For the year, revenue rose 28 percent to $9.16 billion compared to 2020. This included a 29 percent increase in the Tommy Hilfiger business, including a 32 percent gain in Tommy Hilfiger International and a 22 percent rise in Tommy Hilfiger North America revenue, as well as a 39 percent increase in the Calvin Klein business, with similar gains in Calvin Klein International and Calvin Klein North America revenue.
Earnings: Net income in the quarter was $390.8 million compared to a net loss of $57.7 million a year earlier.
Earnings per share was $5.53 for the fourth quarter compared to a loss per share of 81 cents in the prior-year period.
Gross margin in the quarter was 58.3 percent compared to 53.9 percent in the previous year period, driven largely by more full price selling and a favorable shift in regional sales mix. These improvements more than offset higher freight costs, including an increase in air freight to mitigate ongoing supply chain and logistics delays.
For the year, net income was $952.3 million compared to a net loss of $1.14 billion in 2020. EPS was $13.25 for 2021 compared to a loss per share of $15.96 in 2020.
CEO’s Take: Stefan Larsson, CEO, said: “We delivered strong fourth quarter revenue and earnings above guidance. For 2021, we executed on our accelerated recovery priorities, achieving operating margins that were above 2019 pre-pandemic levels and ahead of our plan, driven by strong gross margin expansion, further positioning PVH to win with the consumer in the ‘new normal’ and deliver sustainable profitable long-term growth.”
“As we look ahead, we are confident in the strength and momentum in our business and our ability to drive strong underlying top and bottom line growth by leaning in to what is within our control, despite the significantly increased macroeconomic and geopolitical volatility over the last few months, including the war in Ukraine, the impact of the global pandemic, and the inflationary pressures we see across our regions,” Larsson added. “We will successfully navigate these headwinds in 2022, and we will do it through driving brand and product relevance with our two iconic global brands, Calvin Klein and Tommy Hilfiger, super-charging digital, further improving our consumer engagement and driving efficiencies while investing in our strategic growth areas.”