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current news

Sales, Income Up For PVH In First Quarter


(Filed Under Financial and General Interest News). Sales and income rose dramatically at PVH Corp. in its first fiscal quarter of 2015. The company is parent to such brands ad Calvin Klein and Tommy Hilfiger and four years ago purchased Warnaco.

In the thirteen weeks ended May 1, 2016 PVH earned $231.6 million on sales of $1.918 billion compared to $114.1 million on sales of $1.879 billion in the same quarter last year.

“We are very pleased with our first-quarter results which exceeded our expectations despite the challenging global environment and the difficult retail market in the US,” declared Emanuel Chirico, chairman and CEO, at the start of the conference call to discuss the results. “Overall we had a terrific quarter with revenues increasing 3% on a constant currency basis while earnings per share grew 33% on a constant currency basis.”

He added, “The momentum in the quarter was primarily led by the strength of our Calvin Klein and Tommy Hilfiger international businesses. Our European and China businesses continued to be our healthiest markets while Hong Kong and Brazil are under pressure. From a macro perspective, the U.S. market continues to be the most difficult and volatile market we operate in. Despite that, our U.S. wholesale businesses are running ahead of plan and the prior year actual results. However, our US retail businesses are seeing weaker traffic and higher promotional trends.”

Speaking about his North American Hilfiger business, Chirico complained, “our US retail business continues to be under pressure driven by the weakness in traffic and consumer spending. Comp store sales declined 10% in the first quarter and we have not seen any improvement in second-quarter sales trends and we are not forecasting for this trend to improve for the balance of the year.”

Turning to the company’s Calvin Klein store business, the executive added, “Moving to retail, the business in the U.S. remains challenging with international tourist traffic and spending under the same pressure as we are seeing in our Hilfiger U.S. business. Retail comp trends continued to decelerate into May and we are not planning for this sales trend to improve for the balance of the year.”

In response to a question about average unit retail prices (AUR), Chirico explained, “The underwear business is very strong on the women’s side. Men’s has always been a high AUR so clearly we are not seeing 25% increases in men’s AUR because we were the highest AUR in the category to begin with. But it is very healthy and holding together.”

The PVH executive is optimistic about the growth of his underwear business. “The underwear business, how big can it be? The growth opportunity is women’s. Women’s overall for us is about 40% of our underwear business. The women’s market is five times the size of the men’s market so clearly there is a huge opportunity for us in women’s here in North America. In men’s, the opportunity here in North America continues to be the channel diversification that is somewhat going on. Calvin Klein is a department store brand from Nordstrom’s to Macy’s. Those are our key large accounts, Bloomingdale’s.”

“As you think about it with the growth of pure plays, it is opening us up to a newer consumer and we are capturing that market share be it in on Amazon or urbanoutfitters.com. So really the channel play there in the United States is important for us as we move forward as well.”

“Internationally it is just all white space. We have huge opportunity in Europe to continue to grow that business as the brand continues to expand there both in men’s and women’s. And in Asia which is a direct retail play for us, we continue to see strong comp store sales performance there and I think both men’s and women’s can continue to grow. So I think the underwear business could continue to grow in the mid to high single digits for an extended period of time.”

Chirico also provided insight into his distribution channels. “What we do find is the specialty store channel and the dot-com channel opens us up to a younger consumer, not only for underwear but for all of our businesses. That is exciting for us and we are connecting with that consumer from a marketing perspective, a marketing campaign to engage.”

He added an interesting note about how he views department stores in relation to his own company’s online selling efforts. “One of the things that we talked about three, four years ago is they wanted us from an e-commerce point of view, from a dot-com point of view. They wanted us to help drive traffic to their sites. So we made the decision in North America not to compete directly with them on line. And by that I mean is I think competitors whoever they are, have much bigger direct e-commerce sites than we have. We have made the strategic decision to partner with our department store customers to really expand their e-commerce businesses to make investments on their platforms that our brands are well-positioned not only in their brick and mortar stores but also in their e-commerce sites. And obviously we are seeing outsized growth with that channel of distribution be it Macys.com or LordandTaylor.com.”

Turning to discuss his Amazon business, Chirico emphasized, “It is an opportunity. We try to have different merchandising strategies for both players, it is not the same performance. Obviously the fashion quotient at Macy’s is much stronger, much deeper.”

“Amazon really knows how to sell core product. They are trying to get into the fashion world but they haven’t proved that yet and we will see how that all plays out. But clearly for us comparative wise, it hasn’t been a major discussion point. Calvin and Tommy depending on the retailer in North America, we are two of the top four brands in every major retailer in North America where it is appropriate for us to sell our goods.”

“So the relationships really have never been better and the channel conflict that we manage every day has been going on for the last 20 years whether there was concerns about our own retail stores, whatever and that is - being a global brand that is what we do, that is what we get paid for so I have not seen that intensify significantly.”

A complete transcript of the conference call can be found here: http://seekingalpha.com/article/3978096-pvhs-pvh-ceo-emanuel-chirico-q1-2016-results-earnings-call-transcript


more Financial and General Interest News >>

Published 06-25-2016 by Nick Monjo

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