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Financial Roundup: PVH Earnings Soar on National Brands, Sears Holdings Narrows Losses, Express Rides High On Digital Business

Tommy Hilfiger and Calvin Klein propel PVH beyond expectations, Sears Holdings suffers sales declines on store closures and Express continues to invest in digital as e-commerce outperforms.

PVH Corp.

In a Nutshell: PVH Corp., in reporting strong increases in sales and earnings, raised its full-year earnings outlook based on third quarter outperformance, improvement in foreign currency and the belief that the strength of its Calvin Klein and Tommy Hilfiger brands will continue to drive revenue and profitability increases throughout the fourth quarter. The company said its more favorable outlook takes into account a strong start to the holiday season and an additional $20 million increase in fourth quarter marketing expenditures.

Sales: Revenue in the third quarter ended Oct. 29 increased 5 percent to $2.38 billion compared to $2.24 billion in the prior-year period. Revenue in the Calvin Klein business for the quarter increased 6 percent to $943 million compared to the year-ago period, while Calvin Klein International revenue increased 20 percent to $467 million, driven by continued strong performance in the European wholesale and retail businesses.

Revenue in the Tommy Hilfiger business for the quarter increased 10 percent to $1 billion compared to the prior-year period, while Tommy Hilfiger International revenue increased 16 percent to $609 million (increased 11% on a constant currency basis) compared to the prior year period. Tommy Hilfiger North America revenue increased 2 percent to $410 million, principally attributable to a 6 percent increase in comparable store sales.

Earnings: Earnings before interest and taxes for the quarter increased to 41.8% to $280.7 million from $198 million in the prior year period. EBIT for Calvin Klein more than doubled to $142 million from $69 million a year earlier, while RBIT for Tommy Hilfiger in the prior year period. EBIT for Tommy Hilfiger increased 26.7% to $147 million from $116 million in the prior-year period.

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CEO’s Take: Emanuel Chirico, chairman and chief executive officer, said, “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. 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. 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.”

Sears Holdings

In a Nutshell: Sears Holdings continues to tout its cost cutting measures which has resulted in $1.25 billion in cost savings. The retail group, which operates Sears and Kmart, announced it will continue to streamline its operations, shrink its footprint, reduce expenses and improve its liquidity. The retailer closed the quarter with 1,104 stores, down from 1,503 during the prior-year period. Sears used the proceeds from these store closings and related real estate deals to pay down its real estate loan and term loan, which matures in June 2018.

The company is also leaning into its newest concepts, which center around appliances and mattresses. To further diversify its revenue stream, the retailer will explore third-party partnerships for its Home Services, Innovel, Kenmore and DieHard businesses.

Sales: Total revenue fell to $3.7 billion during the third quarter, compared to $5 billion during the same time last year. The bulk of the decrease was blamed on store closures, while comp stores contributed about $471 million to the decline thanks in part to the closure of Kmart pharmacies and the pullback from consumer electronics in both chains.

Earnings: Sears reported a net loss of $558 million, or $5.19 per diluted share, compared to a net loss of $748 million, or $6.99 per diluted share in the third quarter of 2016. The company also achieved its second consecutive quarter with at least a $100 million improvement in adjusted EBITDA, which CEO and chairman Edward Lampert said is “reflective of the success of the strategic priorities we outlined earlier this year to streamline our operations, reduce inventory and minimize operating expenses” toward the retailer’s goal of achieving positive EBITDA next year.

CEO’s Take: Robert Riecker, Sears Holdings CFO, said: “We are seeing clear progress through initiatives of our strategic restructuring and transformation, which enabled us to achieve substantial improvements to both our Adjusted EBITDA and net loss in the third quarter of 2017. We continue to evaluate innovative ways to deliver the best value and service for our members. To this end, we will build on the success of our recently opened dedicated concept stores to continue delivering specialized integrated retail experiences to our members in the upcoming quarters. As we continue to take action to reduce our operating losses and to improve our performance, we are also committed to taking further decisive steps to strengthen our financial flexibility.”


In a Nutshell: Express continues to invest in its digital capabilities, which has paid off for the retailer in the quarter, in the form of increased traffic and conversions. The upward lift in e-commerce has the company confident that online sales will exceed 40 percent of total sales in the next five years. To that end, it’s expanding its ship from store abilities and has launched buy-online, pickup from store.

The chain is also banking on its relaunched loyalty program, Next, to continue to attract and retain customers.

To help drive brand awareness, Express has partnered with the NBA on a Game Changers campaign designed to attract more men. The retailer sees the NBA as a key partner since it has more millennial fans than any other sports league.

The company’s fourth quarter outlook is for comp sales to be up in the low single digits. Express projects diluted EPS to be in the 40 to 44 cent range. By the end of the year, the company expects to operate 636 stores through the reduction in full line doors in the U.S. and Canada and the increase in outlet locations.

Sales: Net sales decreased by 1 percent to $498.7 million in the third quarter from $506.1 million during the same period of 2016. The company reported a 1 percent dip in comp store sales for the quarter even with a 23 percent spike in e-commerce sales. Digital sales reached 24 percent of total net sales, up from 19 percent last year.

Earnings: The retailer’s net income was $6.3 million or 8 cents per diluted share, compared to $11.6 million or 15 cents per diluted share during the third quarter of 2016.

CEO’s Take: President and CEO David Kornberg said “We have very strong relationships with our suppliers. And we’ve learned a lot over the last few years through the growth of the Express Factory Outlet business in terms of other countries of origin, other places where we can manufacture. That has clearly benefited us this year. It is still ongoing look. We’re constantly looking at ways we can speed up production, ways we can improve our product costs and I see that continuing into next year and beyond. We had concerns in the past in terms of going into some of the countries that we’re working with but a lot of progress has been made in those countries and we feel very comfortable with it and what we’ve seen this year is that there’s been no determent to the quality of the products we’ve delivered and there’s been no delay in the products we’ve delivered into our stores.”