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Calvin Klein Weighed Down PVH, but Tommy Hilfiger Helped Tip the Scales in 2018

Operating in a complex global environment, PVH Corp. sees a strong year ahead driven by its key brands and ability to adapt.

In a Nutshell: PVH Corp. hit record revenues of $9.66 billion in fiscal 2018, but strong Tommy Hilfiger business was outweighed by soft sales at Calvin Klein leading to a fourth-quarter revenue decline.

Chairman and CEO Emanuel Chirico said, “During 2018, we focused on adapting to the changing consumer landscape and geopolitical realities, while taking swift action to address the challenges in our Calvin Klein business. Additionally, we focused on investing in our talent, supply chain, consumer data and insights, and digital capabilities, which we believe positions our businesses for long-term stockholder value creation.”

The company projected 2019 revenue to increase approximately 4 percent. Revenue for the Tommy Hilfiger business is forecast to rise about 6 percent, while revenue for the Calvin Klein business is seen rising around  2 percent and revenue for the Heritage Brands business is projected to increase approximately 3 percent.

Sales: Revenue for the fourth quarter ended Feb. 3 dipped 1 percent to $2.48 billion compared to $2.5 billion in the year-ago period, including a $125 million negative impact resulting from 2017 including an additional week.

Revenue in the Tommy Hilfiger business for the quarter increased 2 percent to $1.2 billion compared to the prior-year period, despite an approximately $60 million negative impact of the 53rd week in 2017. Tommy Hilfiger International revenue rose 3 percent to $721 million, driven by continued strong performance across all regions and channels. Comparable store sales on the adjusted basis increased 16 percent. Tommy Hilfiger North America revenue was up 2 percent to $447 million, while adjusted comparable store sales rose 5 percent.

Revenue in the Calvin Klein business fell 2 percent to $953 million in the quarter, including a negative impact of approximately $50 million from the 53rd week in 2017. Calvin Klein International revenue rose 2 percent to $523 million. International comparable store sales on the adjusted basis increased 6 percent. Calvin Klein North America revenue decreased 7 percent to $430 million, mainly due to the negative impact of the 53rd week and continued softness in the Calvin Klein Jeans business. North America adjusted comparable store sales dipped 1 percent.

Full-year revenue rose 8 percent to a record $9.66 billion from $8.91 billion in fiscal 2017. The gains were attributed to a 12 percent increase in Tommy Hilfiger, driven principally by continued strong performance across all regions and channels. International comparable store sales on an adjusted basis were up 13 percent, while North America adjusted comparable store sales rose 5 percent.

The Calvin Klein business posted an 8 percent gain, driven by growth in Europe and Asia, as well as in the North America wholesale business. International adjusted comparable store sales increased 5 percent, while North America comparable store sales were up 1 percent.

Earnings: Earnings before interest and taxes (EBIT) for the quarter increased to $134 million, inclusive of an $8 million negative impact due to foreign currency translation, from $58 million in the prior year period. This included $41 million in costs related to the Calvin Klein restructuring, a $15 million actuarial loss recognized on retirement plans, and $4 million related to the TH China acquisition.

EBIT for the quarter at Tommy Hilfiger increased to $168 million from $47 million in the prior-year period. EBIT for Calvin Klein dropped to $44 million from $79 million in the prior year period, including costs of $41 million in connection with the restructuring associated with strategic changes for the Calvin Klein business announced in January.

EBIT for 2018 increased to $892 million, inclusive of a $5 million positive impact due to foreign currency translation, from $632 million in the prior year.

CEO’s Take: Emanuel Chirico, chairman and CEO, said: “We are very pleased with our fourth quarter and full year 2018 results, which demonstrated the power of our diversified business model. Tommy Hilfiger had an outstanding quarter, with strong growth across all product categories and regions. Calvin Klein delivered a healthy quarter, with particular strength in Europe, solidifying our confidence in the margin opportunity that we previously identified for 2019 and beyond. The outperformance against our guidance in the Tommy Hilfiger and Calvin Klein businesses was partially offset by weaker trends in our Heritage Brands business.”

“We are well positioned going into 2019 and beyond as we execute against our strategic priorities… I believe that while we, like many other global consumer companies, will continue to face consumer and geopolitical headwinds, the incredible brand power behind Tommy Hilfiger and Calvin Klein will provide us with significant top and bottom line opportunities over the next several years.”

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