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PVH Q4 Sales Up 2% As Full Year Profits Soar


(Filed Under Financial and General Interest News). Sales at PVH Corp. rose 2% in the fiscal fourth quarter ended January 31, 2016, but declined for the full year by 3.1%. Meanwhile net income rose substantially for both the final quarter and full year.

The company earned $134.2 million on sales of $2.01 billion compared to earnings of $51.5 million on sales of $1.97 billion in the fourth quarter ended February 1, 2015. For the full year 2015 the company earned $572.4 million on sales of $7.61 billion compared to earnings in fiscal 2014 of $438.9 million on sales of $7.85 billion.

The PVH results were negatively impacted by currency exchange rates and it made extensive used of non-GAAP (non-generally accepted accounting principles) calculations in presenting its results. It noted in the fourth quarter, “revenue increased 7% on a constant currency basis (increased 2% on a GAAP basis to $2.11 billion) compared to the prior year’s fourth quarter revenue of $2.07 billion.”

During last year PVH noted it “repaid $350 million of debt and repurchased $126 million of stock.”

Chairman and CEO Emanuel Chirico declared of the fourth quarter, “Our Calvin Klein business was a highlight, as investments we made over the last few years continued to generate solid results, and we saw strength across all regions where we operate. Our Tommy Hilfiger business also saw positive momentum in its international markets, highlighting the power of the brand. Lastly, our Heritage Brands business produced a notable improvement in profitability.”

PVH discussed the fourth quarter results of its various components, starting with its Calvin Klein business. Revenue “for the quarter increased 21% on a constant currency basis (increased 15% on a GAAP basis) from $703 million in the prior year’s fourth quarter. Calvin Klein North America revenue increased 22% on a constant currency basis (increased 18% on a GAAP basis) compared to $389 million in the fourth quarter of 2014 primarily driven by growth of over 20% in the North America wholesale business due in large part to continued strength in underwear. Revenue growth in the North America retail business was due principally to square footage expansion in Company-operated stores, including the conversion of IZOD stores to Calvin Klein Accessory and Calvin Klein Underwear stores, coupled with a 4% increase in comparable store sales as compared to the prior year’s fourth quarter, despite the continued decline in traffic and consumer spending trends in Calvin Klein’s U.S. stores located in international tourist locations.”

The company added, “Calvin Klein International revenue increased 21% on a constant currency basis (increased 10% on a GAAP basis) from $314 million in the prior year’s fourth quarter, including a retail comparable store sales increase of 6%. The increase was driven by strong growth in Europe and China, partially due to the benefit of the Chinese New Year.”

“Earnings before interest and taxes for the quarter was $101 million on a GAAP basis compared to $74 million in the prior year’s fourth quarter. The increase was principally driven by the earnings increase on a non-GAAP basis,” the company concluded, “combined with a reduction in Warnaco integration and restructuring costs compared to the prior year’s fourth quarter.”

Revenue in the quarter for the company’s Tommy Hilfiger business “increased 5% on a constant currency basis (decreased 2% on a GAAP basis) from $919 million in the prior year’s fourth quarter. Tommy Hilfiger North America revenue increased 1% on a constant currency basis (decreased 1% on a GAAP basis) compared to $443 million in the fourth quarter of 2014, as growth in the wholesale business was mostly offset by softness in the retail business. North America retail comparable store sales declined 7% compared to the prior year’s fourth quarter, driven by continued weakness in traffic and consumer spending trends in Tommy Hilfiger’s U.S. stores located in international tourist locations, which represent a significant portion of the business.”

PVH explained that “Tommy Hilfiger International revenue increased 8% on a constant currency basis (decreased 2% on a GAAP basis) from $476 million in the prior year’s fourth quarter, driven by continued strong performance in most European markets, including a 10% increase in retail comparable store sales and healthy growth in the wholesale business on a constant currency basis for the region.”

For the Hilfiger business, “Earnings before interest and taxes for the quarter was $83 million on a GAAP basis compared to $118 million in the prior year’s fourth quarter. The decrease was principally driven by the earnings decrease on a non-GAAP basis.”

Chirico added more details about the company’s Calvin Klein brand during the analyst conference call to discuss the quarter. “Our men’s division grew its market share and continued to hold the number one market position across U.S. department stores. Women’s also posted stellar results with a 20% year-over-year increase driven by new specialty store and ecommerce distribution, growth in panties and our focus on better bra fits, as well as the exceptional response to our modern cotton assortment, which is a casual alternative to our core lingerie business. Importantly, our modern product line is increasing our engagement with a younger consumer, which we believe will create loyalty over the long term as the younger consumer graduates in the future to our more elevated product categories and our more elevated product offerings.”

Chirico also revealed, “The Calvin Klein underwear business is by its nature one of the highest margin businesses we have from a profitability point of view. Our underwear business in general is one of our highest operating margin businesses, so I would not anticipate significant margin expansion in those businesses but I would expect continued top line growth in those businesses which are margin-rich, so I think as they grow faster than the core, I think you’ll see margins improve.”

Two of the brands that PVH acquired when it completed its takeover of Warnaco in 2015 are also doing well. Chirico said, “Warner’s and Olga improved market share positions for bras in the U.S., both in the chain and department store channels with both brands significantly increasing their market share. During 2015, the Warner’s No Side Effects bra drove significant performance improvement as its television commercial effectively communicated” its important features “and led to significant conversion at point of sale.”

PVH was cautious about predicting results going forward, but stated “Revenue in 2016 is currently projected to increase approximately 2% on a constant currency basis (increase approximately 1% on a GAAP basis) as compared to 2015. It is currently projected that revenue for the Calvin Klein business will increase approximately 6% on a constant currency basis (increase approximately 4% on a GAAP basis). Revenue for the Tommy Hilfiger business is currently projected to increase approximately 3% on a constant currency basis (increase approximately 2% on a GAAP basis). Revenue for the Heritage Brands business is currently projected to decrease approximately 7% on a GAAP basis principally due to the continued rationalization of the business, including the loss of revenue from the Izod retail business (from which the company completed its exit during the third quarter of 2015) and from several licensed product lines in the dress furnishings business that were discontinued in 2015 or will be discontinued in 2016.”

A transcript of the conference call can be found here:

http://seekingalpha.com/article/3960837-pvhs-pvh-ceo-emanuel-chirico-q4-2015-results-earnings-call-transcript?page=1


more Financial and General Interest News >>

Published 03-31-2016 by Nick Monjo

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