Second quarter revenue grew 7 percent to $2.1 billion, compared to the same period last year, which exceeded guidance.
GAAP basis was $1.52 compared to guidance of $1.35 to $1.38, while non-GAAP basis was $1.96 compared to guidance of $1.60-$1.63. EPS grew 37 percent on a GAAP basis and 15 percent on a non-GAAP basis compared to last year.
“Our better than expected second quarter results reflect the continued momentum and ongoing operating efficiencies across our diversified business model,” said PVH Chairman and CEO Emanuel Chirico. “Our results reflect a planned increase of approximately $25 million of marketing compared to the prior year related to Calvin Klein and Tommy Hilfiger, which we believe will continue to drive market share gains and allow us to capitalize on the brands’ significant international expansion opportunities over the next several years.”
Calvin Klein saw an increase in revenue in the second quarter of 8 percent to $786 million compared to the same period last year. This includes a $15 million reduction from the November 2016 deconsolidation of the Calvin Klein Mexican business.
Meanwhile, Calvin Klein’s international revenue grew 20 percent to $394 million compared to the same period of 2016. The company attributes the revenue growth to an impressive wholesale performance in Europe and China, as well as growth in the retail business from a 6 percent increase in international comparable store sales and square footage expansion in company-operated stores.
However, Calvin Klein North America did not fare as well, with a revenue decrease of 1 percent to $392 million compared to the same period last year. The company attributes this decrease to the Mexico deconsolidation, and a 2 percent decline in North America comparable store sales.
Earnings, prior to interest and tax, dropped to $96 million from $106 million during the second quarter. The company says that the decrease was mostly due to a $20 million planned increase in marketing and investments associated with the Calvin Klein creative team and leadership changes, which offset the revenue increase for the business.
Tommy Hilfiger saw a revenue increase in the second quarter of 4 percent to $892 million compared to last year’s second quarter. Earnings included $7 million from the April 2016 acquisition of the 55 percent interest in the former Tommy Hilfiger joint venture in China that it previously did not own, and $7 million from the relocation of the Tommy Hilfiger New York office.
The brand saw earnings before interest and taxes on a non-GAAP basis for the period increasing to $105 million, up from $97 million during the same period last year. The earnings increase was mostly due to gross margin improvements due to less promotional selling, specifically in North America, as well as the strong Tommy Hilfiger international revenue increase. Somewhat offsetting the increase was the $7 million increase in marketing during the second quarter this year, compared to last year’s second quarter.
Heritage Brands, which include Van Hausen and Izod, saw revenue increase 13 percent to $392 million for the second quarter. Comparable store sales grew 1 percent.
Earnings before interest and taxes for the quarter grew to $35 million from $12 million during the period the year before.
The raised its FY2017 EPS guidance, to a GAAP basis increase to $6.44 to $6.54, up from its previous $6.24 to $6.34. On a non-GAAP basis, PVH Corp. raised its predictions from $7.40 to $7.50, up to $7.60 to $7.70. Guidance includes a negative impact of $0.20 per share due to foreign currency exchange rates compared to previous guidance of $0.35.
“We have raised our full year earnings outlook based on our second quarter outperformance, an improvement in foreign currency rates and our belief that the strength of our brands will continue to drive our second half performance, despite the ongoing volatility in the macroeconomic and geopolitical environment,” said Chirico. “In addition, in line with our projected full year sales increase, we are now planning to invest an additional $10 million in marketing during the second half of this year to capitalize on the continued momentum we are seeing in our Tommy Hilfiger and Calvin Klein businesses.”