“We are very pleased with the strong performance in the third quarter, which exceeded our expectations despite the multiple natural disasters that negatively impacted our North America businesses,” said Emanuel Chirico, PVH Corp. Chairman and CEO.
Net income for the quarter grew 13 percent to $237.4 million for the quarter, up considerable compared to $210 million during the same period last year. Meanwhile, third quarter revenue increased 5 percent to $2.36 billion, compared to $2.24 billion during the same period last year, which surpassed the company’s guidance of a 4 percent increase.
Third quarter EPS also surpassed expectations, with a GAAP basis of $3.05, compared to a guidance of $2.74 to $2.78. On a non-GAAP basis, EPS was raised to $7.78 to $7.80, from a previous $7.60 to $7.70.
Revenue for the Calvin Klein sector grew 6 percent to $943 million compared to the third quarter last year, which includes around $20 million reduction resulting from the Nov. 2016 deconsolidation of the company’s Calvin Klein business in Mexico. Meanwhile, Calvin Klein’s international revenue grew 20 percent to $467 million compared to the same period last year, driven by strong European wholesale business and international retail outcomes. The company attributes retail growth to a 9 percent increase in international comparable store sales and square footage expansion in company-operated stores.
Calvin Klein North America suffered, dropping 5 percent to $476 million compared to the same time last year, due in part by the Mexico deconsolidation and a 1 percent drop in North America comparable store sales.
The brand’s earnings before interest and taxes on a GAAP basis were $142 million for the third quarter, a drop compared to $146 million during the same period last year. PVH Corp. attributes this drop to around $15 million in planned expenditures to increase in marketing, which offset the revenue and gross profit increases in the business.
Tommy Hilfiger saw a revenue increase of 10 percent for the quarter, to $1 billion compared to the same period last year. International revenue grew 16 percent to $609 million, driven in part by European and Asian sales. International comparable store sales increased 7 percent.
North American revenue grew 2 percent to $410 million, due in part to a 6 percent increase in comparable store sales, somewhat offset by a reduction of around $20 million due to the discontinuation of the company’s womenswear wholesale business in the U.S. and Canada during the fourth quarter last year—in connection with the licensing of the business to G-III Apparel Group.
Earnings before taxes on a GAAP basis grew $147 million from $116 million during the same period last year. This includes costs of $6 million in connection with the April 2016 acquisiton of the 55 percnt interest in the Tommy Hilfiger joint venture in China, and the $5 million used to relocate the Tommy Hilfiger office in New York.
Earnings before interest and taxes on a non-GAAP basis for the quarter grew to $158 million, up from $117 million during the same period last year. The earnings increase was due in part to strong Tommy Hilfiger international revenue increase, as well as an overall gross margin gain, specifically in North America.
Heritage Brands business for the third quarter fell 7 percent to $396 million, down compared to law year due mainly to a planned shift in timing of wholesale shipments form the third quarter going into the second quarter. Comparable store sales increased 2 percent.
Earnings before interest and taxes for the quarter fell to $30 million from $44 million in the year before, driven by revenue decrease and deleveraging of expenses.
Full Year Guidance
“We continue to over-deliver against our 2017 plan, even with the additional marketing investments we have made, driven in large part by the continued momentum across our Calvin Klein International and Tommy Hilfiger businesses and ongoing operating efficiencies across our diversified business model,” said Chirico. In today’s ever-changing global consumer environment, we continue to actively adapt our businesses, invest across our organization and find innovative ways to engage consumers, as our recent brand announcements demonstrate.”
The company anticipates earnings per share on a GAAP basis in the range of $6.80 to $6.82, compared to $6.79 during the period last year. Due to the Mexico deconsolidation and the G-III license, negatively impacting revenue in 2017 as compared to 2016 is a reduction of around $150 million. Full Year 2017 guidance was raised to 7 percent increase, up from previous guidance of 6 percent.
Calvin Klein revenue is projected to increase around 9 percent, which excludes the negative impact of the Mexico deconsolidation. Revenue for Tommy Hilfiger business is expected to grow around 8 percent, which includes the negative impact of the G-III license. Revenue for the Heritage Brands is anticipated to be flat compared to last year.
“We believe that the incredible brand power behind Calvin Klein and Tommy Hilfiger will drive continued market share gains and allow us to capitalize on the brands’ significant growth opportunities going forward,” said Chirico. “We believe that we are well positioned to execute our strategic priorities through the efforts of the talented associates at PVH, enabling us to deliver long-term stockholder value.”