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PVH Says Coronavirus Shuts or Limits Most CK, Tommy Hilfiger Stores in China

On Wednesday, PVH Corp. said it has taken actions to deal with the coronavirus outbreak in China, while lowering its earnings guidance for the 2019 fiscal year.

Similar to moves made by peers operating in China, the apparel giant said the majority of the Calvin Klein and Tommy Hilfiger company-operated and franchise stores in the mainland are temporarily closed due to coronavirus concerns, including as a result of related government-imposed restrictions. The stores that are open are operating for limited hours and are experiencing significantly lower-than-planned traffic and sales trends.

While its earnings guidance announced on Jan. 9 did not contemplate the coronavirus outbreak, PVH is reaffirming its guidance with respect to EPS on a non-GAAP basis, which is expected to be at least $1.79 for the fourth quarter 2019 and at least $9.45 for the full year. The company said it believes that it would have exceeded its non-GAAP earnings guidance had the coronavirus outbreak not occurred during the final two weeks of its fiscal year.

Greater China is expected to account for approximately 7 percent of 2019 revenue and the Asia Pacific region should make up around 16 percent of 2019 revenue, PVH said. In addition, about 20 percent of the company’s global sourcing is derived from China, including approximately 10 percent of sourcing inbound to the U.S.

“While the coronavirus will impact our businesses in the near-term, our long term growth opportunities across the Asia Pacific region are significant,” Emanuel Chirico, chairman and CEO of PVH, said. “Given our diversified, global business model and the strength of our iconic brands, we are well positioned to manage this period of uncertainty. We will provide an operational and financial update on our upcoming fourth quarter and full year 2019 earnings call.”

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The company’s updated earnings guidance includes expectations that earnings per share (EPS) for the fourth quarter and full year 2019 will be lower than its guidance announced on Jan. 9, due to an actuarial loss expected to be recognized on its retirement plans in the fourth quarter of 2019, primarily resulting from a decrease in the discount rate in the latter part of January. EPS guidance previously announced was for approximately 20 cents for the fourth quarter and around $6.32 for the full year.

Meanwhile, PVH said it is working with local authorities to ensure the health, wellness and safety of its associates and business partners in connection with the coronavirus outbreak.

“We are closely monitoring the situation in China,” Chirico said. “Our priority is the well-being of our associates and business partners, their families and local communities, and our hearts are with those that have been impacted by the coronavirus. I want to sincerely thank our dedicated associates in Asia who are going above and beyond, with many working remotely from home, to drive our business forward.”