Increase in full year revenue & EPS guidance, PVH

08 Sep '10

5 min read

Segment Presentation
The acquisition of Tommy Hilfiger has significantly impacted the way the Company manages and analyzes its operating results. As such, the Company has changed the way it discusses its business segments and results. The Company now aggregates its segments into three main businesses:

(i) Calvin Klein, which consists of the Company's Calvin Klein Licensing segment (including the Company's Calvin Klein Collection business, which the Company operates directly in support of the global licensing of the Calvin Klein brands) and the Company's Other (Calvin Klein Apparel) segment, which is comprised of the Company's Calvin Klein dress furnishings, sportswear and outlet retail divisions;
(ii) Tommy Hilfiger, which consists of the Company's Tommy Hilfiger North America and Tommy Hilfiger International segments; and
(iii) Heritage Brands, which consists of the Company's Heritage Brand Wholesale Dress Furnishings, Heritage Brand Wholesale Sportswear and Heritage Brand Retail segments.

Calvin Klein
The Calvin Klein business continued its growth momentum during the quarter, with an increase in royalty revenue of 11% as compared to the prior year's second quarter, fueled by strong performance across virtually all product categories, with jeans, underwear, fragrance, women's sportswear and dresses performing particularly well. Sales for the Company's Calvin Klein business increased 17% as compared to the prior year's second quarter, with comparable retail store sales growing 14% as compared to the same period.

Earnings before interest and taxes for the Company's Calvin Klein business was $54.0 million in the second quarter. This represents a 21% increase over the prior year's second quarter non-GAAP earnings before interest and taxes, and a 25% increase over the GAAP earnings before interest and taxes for the same period last year. The increase was principally due to the royalty and sales increases discussed above, combined with an improvement in gross margin due to strong sell-throughs in both the wholesale and retail divisions. Partially offsetting these gains was an increase in advertising spending in the Company's Calvin Klein Licensing segment that the Company elected to undertake to support various new product launches in the jeans, underwear and fragrance categories.

Tommy Hilfiger
The Company's newly acquired Tommy Hilfiger business generated $532.2 million of revenue in the second quarter, which was $12.2 million higher than the Company's previous guidance. On a non-GAAP basis, the Tommy Hilfiger business contributed earnings before interest and taxes of $56.6 million in the second quarter, which was $16.6 million higher than the Company's previous guidance.

The better than expected results were due to stronger than anticipated sales and gross margins in all divisions, combined with a shift in the timing of certain expenses of approximately $5 million that were planned to occur in the second quarter but are now expected to be incurred in the second half of 2010. While all divisions were strong during the quarter, the North American retail and European wholesale divisions performed particularly well.

The GAAP loss before interest and taxes for the Company's Tommy Hilfiger business was $(7.2) million.

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Phillips-Van Heusen Corporation

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