Overview of Second Quarter Results:
-On a non-GAAP basis, earnings per share was $1.39, which exceeded the Company’s guidance of $1.35 and the prior year’s second quarter earnings per share of $1.28.
-GAAP loss per share was $(0.20) as compared to the prior year’s second quarter earnings per share of $1.22, driven by the acquisition, integration and restructuring costs associated with the Company’s acquisition of The Warnaco Group, Inc. (“Warnaco”). A significant portion of these costs was non-cash.
-Revenue increased 47% to $1.965 billion, as compared to the prior year’s second quarter. The increase was principally driven by the addition of approximately $507 million of revenue related to the newly acquired Warnaco businesses, net of a reduction in licensing revenue attributable to Warnaco for the prior year.
-Also contributing to the increase was incremental revenue of $77 million in the Tommy Hilfiger business, $43 million in the pre-acquisition Calvin Klein businesses and $22 million in the pre-acquisition Heritage Brands wholesale businesses, partially offset by a reduction of $13 million in the Heritage Brands Retail business and $8 million attributable to the Izod women’s and Timberland wholesale sportswear businesses that the Company exited in 2012.
Commenting on these results, Emanuel Chirico, Chairman and Chief Executive Officer, noted, “We are pleased with our second quarter performance, which exceeded our previous guidance for both revenue and earnings per share, despite volatility in consumer spending during the second quarter, particularly highlighted by weakness in the United States and Europe.
“Our results for the quarter were driven by the outperformance of most of our newly acquired businesses coupled with organic growth in our Tommy Hilfiger and pre-acquisition Calvin Klein and wholesale Heritage Brands businesses, which more than offset the continued underperformance in our Tommy Hilfiger Japan, Bass retail and Calvin Klein Europe businesses.”
Mr. Chirico continued, “Our first half efforts have focused around integrating the acquired Warnaco businesses, with an emphasis on making investments in our people and filling key open positions, upgrading the quality and product design of Calvin Klein jeanswear, enhancing the existing operating infrastructure, reducing excess inventory levels in parts of the acquired Calvin Klein businesses, and restructuring our customer distribution in various regions.
“Our integration efforts and investments in the newly acquired businesses will intensify in the second half of the year, as we continue to invest in building a strong foundation for the future, which will have a negative impact on our year-over-year comparisons.
“In addition, as we anniversary strong multi-year sales gains at our Tommy Hilfiger and pre-acquisition Calvin Klein businesses in the second half of the year, we are continuing to hold our full year earnings per share guidance at $7.00 due to our cautious outlook that the apparel consumer environment will remain soft and sales volatility will continue, especially in Southern Europe.”
Mr. Chirico concluded, “We believe the investments we make today are necessary to rebuild the newly acquired Calvin Klein businesses and will drive our growth going forward. We are confident that these initiatives will improve and expand our brand presence globally and will position us for significant future growth.”
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