PVH Corporation
(PVH) posted yet another better-than-expected quarterly results.
The company's second quarter fiscal 2013 adjusted earnings per
share rose 8.6% year over year to $1.39 and beat its own guidance
of $1.35 and the Zacks Consensus Estimate of $1.37. The upside was
primarily driven by strong revenue growth from the acquisition of
The Warnaco Group, Inc. and improved margins.
However, including acquisition,
integration and restructuring costs related to Warnaco Group, the
company posted a loss of 20 cents per share compared with earnings
of $1.22 reported in the comparable year-ago period.
Quarter in
Detail
During the quarter, PVH Corp.’s
total revenue jumped 47.0% to $1,964.8 million compared with
$1,336.6 million in the year-ago quarter. The year-over-year
increase in revenues was attributable to robust sales performances
across all segments of the company. Moreover, quarterly
revenues surpassed the Zacks Consensus Estimate of $1,882.0
million.
PVH Corp.’s adjusted operating
profit rose 35.2% to $213.3 million from $157.8 million in the
year-ago comparable quarter. However, the company’s operating
margin contracted 90 basis points (bps) to 10.9% from the year-ago
period. The year-over-year decline in operating margin was
primarily due to increased selling, general and administrative
(SG&A) expenses, which more than offset the positive impact of
the Warnaco Group acquisition.
Segment
analysis
From the beginning of first-quarter
fiscal 2013, PVH Corp. has decided to report its financial results
under 3 business segments – a) Calvin Klein which includes Calvin
Klein North America and Calvin Klein International segments, b)
Tommy Hilfiger comprising Tommy Hilfiger North America and Tommy
Hilfiger International businesses, and c) Heritage Brands
consisting of Heritage Brands Wholesale and Heritage Brands Retail
segments.
Calvin Klein’s
revenues jumped more than twofold to $670.6 million from $251.2
million in the year-ago quarter. This year-over-year increase in
revenues came on the back of the Warnaco acquisition and a 6% rise
in comparable-store sales (comps) at PVH Corp.’s Calvin Klein North
America retail business. However, comps at the company’s Calvin
Klein International segment dropped 1%.
The segment’s adjusted operating
profit rose 58.3% to $95.3 million from $60.2 million, primarily
driven by the Warnaco acquisition, strong sales at the Calvin
Klein’s North America segment and an improved gross profit
resulting from higher average unit retail selling price.
Revenues at the company’s
Tommy Hilfiger segment increased 10.7% to $799.3
million from $721.9 million in the year-ago period, due to 10%
growth in the North American business and 11% rise in international
business. The segment’s North American business mainly benefited
from a 7% rise in retail comps, along with square footage
expansion. Further, double-digit growth in the European wholesale
business, 6% rise in the European retail business and retail square
footage expansion drove the segment’s international revenues.
The segment’s adjusted operating
profit grew 2.6% to $99.8 million from $97.2 million in the second
quarter of fiscal 2012. The increased operating profit was due to
revenue growth at the segment’s North American business, partially
offset by weak performance in Japan and margin pressure in
Europe.
The company’s Heritage
Brands segment’s revenues increased 36.2% year over year
to $495.0 million, up from $363.5 million in second-quarter fiscal
2012. The increase was primarily driven by the newly acquired
Speedo swim product and Warner’s and Olga women’s intimate apparel
businesses, partially offset by a 2% negative impact due to the
company’s exit from Izod women’s and Timberland wholesale
businesses.
Adjusted operating profit jumped
92.2% year over year to $44.4 million, driven by increased revenues
but partially offset by decline in gross margin at the segment’s
retail business due to higher promotional spending.
Outlook
Despite posting
better-than-expected second-quarter results, PVH Corp. remains
cautious for the remaining period of fiscal 2013 due to the
prevalent uncertain macroeconomic situation. However, it has
slightly raised the fiscal 2013 revenue guidance to $8.25 billion
from $8.2 billion projected earlier.
The company’s Calvin Klein, Tommy
Hilfiger and Heritage Brands are anticipated to contribute $2.75
billion, $3.42 billion and $2.08 billion, respectively toward the
total revenue. Moreover, the company still expects fiscal 2013
adjusted earnings to come in at $7.00 per share. Currently, the
Zacks Consensus Estimate stands at $7.18 per share.
PVH Corp. reiterated its intention
to repay about $400 million of debt, and projects total interest
expense of $195–$200 million in fiscal 2013. Tax rate is likely to
be in the range of 25.5%–26.0%.
For third-quarter fiscal 2013, the
company expects total revenue of $2.2 billion with Calvin Klein,
Tommy Hilfiger and Heritage Brands contributing approximately $750
million, $900 million and $550 million, respectively.
During the quarter, the company is
anticipating interest expense of nearly $50 million and tax rate of
approximately 26.5%.
Based on the above-mentioned
assumption, PVH Corp. expects third-quarter fiscal 2013 adjusted
earnings to come in at approximately $2.20 per share. Currently,
the Zacks Consensus Estimate stands at $2.34 per share.
Other Stocks to
Consider
Currently, PVH Corp. carries a
Zacks Rank #3 (Hold). Better-performing stocks in the apparel
retail industry include Joe’s Jeans Inc. (JOEZ),
Michael Kors Holdings Ltd. (KORS) and
G-III Apparel Group, Ltd. (GIII). While Joe’s
Jeans and Michael Kors both carry Zacks Rank #1 (Strong Buy), G-III
Apparel has a Zacks Rank #2 (Buy).
G-III APPAREL (GIII): Free Stock Analysis Report
JOES JEANS INC (JOEZ): Free Stock Analysis Report
MICHAEL KORS (KORS): Free Stock Analysis Report
PVH CORP (PVH): Free Stock Analysis Report
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