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PVH EPS down from $1.91 to $1.47

Thursday June 5, 2014 15:50 CEST

Tommy HilfigerPVH Corp. reported 2014 its first quarter results. Earnings per share on a non-GAAP basis was $1.47 as compared to $1.91 in the prior year's first quarter.


Revenue in the Calvin Klein business increased 4% to $665 million from $638 million on a non-GAAP basis in the prior year. On a GAAP basis, total Calvin Klein revenue increased 9% as compared to the prior year revenue of $608 million, which was $30 million lower than revenue on a non-GAAP basis.

Revenue for the North American business increased 3%, driven by an additional ten days of operations for the businesses acquired with Warnaco on February 13, 2013, along with modest growth in both the wholesale and retail businesses. The company's North America retail comparable store sales were flat.

The Calvin Klein international business, which is principally comprised of the Asia, Europe and Brazil businesses acquired with Warnaco, posted revenue of $328 million, an increase of 6% on a non-GAAP basis, due principally to growth in Asia and the revenue for the additional ten days of operations in the first quarter of 2014.

The absence in 2014 of the $30 million of sales returns discussed above resulted in a GAAP revenue increase for the Calvin Klein International business of 17% over prior year revenue of $280 million. The company's international retail comparable store sales declined 5%, primarily driven by the ongoing transitioning of the Europe jeans business and the absence of the Chinese New Year holiday in the first quarter of 2014.

The jeans business in Europe remained under pressure due to the business' concentration in Italy, where the economic environment remains weak, combined with the initiative to restructure the sales distribution mix.

Royalty revenue of $45 million increased 13% in the first quarter, excluding a negative 10% impact related to the absence of royalty revenue from Warnaco in the current year, as the prior year's first quarter royalty revenue of $44 million included $4 million from Warnaco for the ten days prior to the acquisition. Including such revenue from Warnaco in the prior year, royalty revenue increased 3%, primarily driven by strength in women's apparel and handbags.

Earnings before interest and taxes on a non-GAAP basis for the Calvin Klein business was $82 million as compared to $106 million in the prior year's first quarter. This decrease was driven principally by strategic investments in the acquired Calvin Klein businesses and the ongoing transitioning of the Europe jeans business, combined with a decrease in gross margin in North America attributable to higher promotional activity intended to drive traffic and sales due to the unseasonably cold weather.

GAAP earnings before interest and taxes for the Calvin Klein business was $74 million as compared to a loss of $(24) million in the prior year's first quarter. The increase was principally driven by a reduction in acquisition and integration costs incurred during the first quarter of 2014 as compared to 2013, partially offset by the earnings decrease on a non-GAAP basis discussed above.

Revenue in the Tommy Hilfiger business increased 6% to $862 million as compared to $811 million in the prior year. Revenue in the Tommy Hilfiger North America business increased 5%, due principally to low single-digit wholesale growth, 2% retail comparable store sales growth and retail square footage expansion.

Revenue in the Tommy Hilfiger International business increased 8% over the prior year, driven by 6% comparable store sales growth in Europe and square footage expansion in the company's own retail stores. Also contributing to the revenue growth was the positive impact of foreign currency translation resulting from a stronger Euro in the first quarter of 2014 as compared to the prior year.

Earnings before interest and taxes for the Tommy Hilfiger business decreased 2% to $115 million from $118 million in the prior year's first quarter, principally driven by a decrease in gross margin in North America attributable to higher promotional activity intended to drive traffic and sales due to the unseasonably cold weather, partially offset by an increase in European earnings.

Revenue for the Heritage Brands businesses was $436 million, a 2% decrease compared to the prior year period excluding $47 million of revenue related to the Bass business, as relatively flat sales in the wholesale business were more than offset by an 11% decline in retail comparable store sales. Including the Bass revenue in 2013, revenue decreased 11% as compared to the prior year period revenue of $491 million.

Earnings before interest and taxes for the Heritage Brands business was $29 million on a non-GAAP basis, as compared to $39 million in the prior year's first quarter. The decrease was principally driven by a gross margin decline attributable to higher promotional activity in the business in the first quarter of 2014 in response to the heightened competitive environment in the moderate tier. Partially offsetting these declines was the absence of losses incurred in 2013 attributable to the exited Bass business.

On a GAAP basis, earnings before interest and taxes for the Heritage Brands business was $24 million as compared to $22 million in the prior year's first quarter, as the decrease in earnings before interest and taxes on a non-GAAP basis discussed above was more than offset by a reduction in acquisition and integration costs incurred in 2014 as compared to the prior year.

First quarter consolidated earnings: On a non-GAAP basis, earnings before interest and taxes decreased to $203 million from $241 million in the prior year's first quarter, driven principally by investments in the businesses acquired with Warnaco and underperformance in certain other businesses, as discussed above.

Earnings before interest and taxes on a GAAP basis was $85 million as compared to $18 million in the prior year's first quarter. The earnings increase was primarily due to a decrease in acquisition, integration and restructuring costs as compared to the first quarter of 2013, partially offset by the decrease in earnings before interest and taxes discussed above.

Net interest expense decreased to $41 million from $45 million on a non-GAAP basis in the prior year's first quarter due to lower average debt balances, combined with the effect of the amendment and restatement of the company's credit facility during the first quarter of 2014 and the redemption of its 7 3/8% senior notes due 2020 in connection therewith. GAAP net interest expense was $46 million in the prior year's first quarter.End of Article

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