PVH Corp. posted significant increases in income and revenue in the second quarter, lifted by its key brands, but warned of potential hazards ahead.
In a Nutshell: Propelled by its core Calvin Klein and Tommy Hilfiger brands, PVH Corp. scored strong profit gains in the second quarter under a foundation of wide revenue increases in key regions. The company increased its revenue and earnings guidance for the year, but said it continues to take “a prudent approach” to planning in the second half due to “macroeconomic and geopolitical volatility around the world.”
Sales: Revenue for the second quarter ended Aug. 5 increased 13 percent to $2.3 billion compared to the prior-year period. By segment, revenue in the Calvin Klein business rose 18 percent in the quarter to $925 million compared to the prior-year period. Calvin Klein International revenue increased 16 percent to $458 million in the period, driven by strong performances in Europe and Asia. Calvin Klein North America revenue grew 19 percent to $467 million year-to-year, thanks largely to a strong wholesale performance.
Revenue in the Tommy Hilfiger business was up 15 percent to $1 billion in the quarter from a year earlier. Tommy Hilfiger International revenue rose 20 percent to $592 million year-to-year, driven by continued strong performance across all regions and channels. Tommy Hilfiger North America revenue increased 9 percent to $437 million from the prior-year period, mainly on continued strong performance in the wholesale business. Revenue in the Heritage Brands business for the quarter fell 3 percent to $380 million year-to-year.
Earnings: Net income for PVH Corp. in the quarter jumped 37.9% to $164.7 million from $119.4 in the year-ago period. Earnings before interest and taxes (EBIT) increased 27.6% to $231 million compared to the year-ago period. Included in the EBIT were costs of $7 million related to the TH China acquisition. The prior-year EBIT included $19 million in costs related to the TH China acquisition, the relocation of the Tommy Hilfiger office in New York and the consolidation within the company’s warehouse and distribution network in North America.
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Calvin’s Klein EBIT increased 9.4% to $105 million, primarily attributable to revenue gains that were partially offset by the impact of “aggressively clearing inventory in connection with the Fall 2018 global denim relaunch,” the company noted.
In Tommy Hilfiger, EBIT in the quarter increased 47.3% to $134 million year-to-year. EBIT in Heritage Brands decreased to $33 million from $35 million in the prior-year period.
CEO’s Take: Emanuel Chirico, PVH chairman and CEO, said: “Our better than expected second quarter revenue and earnings reflected continued broad-based strength across our businesses and further underscored the momentum in our global designer lifestyle brands, Calvin Klein and Tommy Hilfiger, and the power of our diversified business model. We are increasingly evolving our business model and investing across our brands, our people and our platforms, while finding innovative ways to engage consumers.”
“We have made great progress in enhancing our consumer insights capabilities, increasing our efforts around online and offline consumer experiences, and driving engagement with the next generation of consumers. As we execute on our strategic priorities, we believe that we can continue to grow our global footprint, while delivering a sustainable trajectory of long-term growth and stockholder value creation.”