In the money: Buoyant PVH happy with Hilfiger
Tommy Hilfiger’s revenues were up 4% to $721.9m in the second quarter
More than two years after its transformational acquisition of the Tommy Hilfiger business, PVH Corp is reaping the rewards of the US$3bn deal around the world.
Second quarter profit was up 31.5% to US$87.7m, while underlying revenues increased 4% to $1.337bn – and chairman and CEO Manny Chirico was swift to put much of the credit at Tommy’s door, labelling the brand’s performance “exceptional”.
Tommy Hilfiger’s revenues were up 4% to $721.9m, with operating income surging up 28%, but strip away currency effects and those increases were 10% and over 34% respectively.
Drilling down into the detail, international revenues were up 9%, led by an impressive 15% increase in retail comps in the supposedly economically fragile Europe, alongside a 9% wholesale revenue rise.
“Geographically, we continue to see strong growth in Central and Northern Europe, with particular strength in France, Germany and Turkey, partially offset by softness in Southern European markets, with particular focus on Spain and Italy,” Chirico explained.
The picture in North America was, if anything, even brighter, he added, pointing to an 11% revenue increase, a similar rise in retail comps and high single-digit growth in wholesale receipts.
“We continue to see momentum in North America and strongly believe that the significant investments we are making in product and in our marketing programmes are paying dividends for us,” Chirico said.
But he displayed a little caution when discussing the remainder of the year, forecasting Tommy Hilfiger revenues up 7-8% on a constant currency basis – even though third quarter revenues are so far running ahead of expectations, up 8-9%.
“Given the uncertain economic environment, we are planning our revenue growth for the balance of the year more conservatively than current trends would indicate,” Chirico explained.
Calvin Klein more mixed
If the performance of Tommy Hilfiger was unequivocally positive, the picture with fellow marquee brand Calvin Klein was a little more mixed.
Revenues were up 5%, driven by its performance in North America where retail comps also rose 5%, and despite the softness in the global jeans and women’s underwear sectors.
For the full year, the brand is expected to post revenue growth of about 10%.
Meanwhile, royalty revenues for Calvin Klein were up 6% at constant exchange rates, thanks to the strength of women’s sportswear, dresses, men’s and women’s footwear, and handbags and accessories, all of them posting double-digit sales increases.
However, this was offset by a 10% decline in Warnaco’s global sales, with Europe in general and apparel and underwear in particular badly affected.
That helped to drive Calvin Klein licensing revenues in Europe down 12%, taking the gloss off an otherwise positive performance: North America up 5%, Asia up 6% (growth in China, Hong Kong and India offset by weakness in Korea), and Latin/South America surging 25% thanks to Brazil.
PVH’s Heritage Brands business also had a mixed quarter, thanks to a weak performance at JC Penney and a “significant decline in customer traffic”.
“Clearly the Heritage business is in the midst of a major turnaround,” admitted Chirico, before hastily adding: “We are very confident and we feel we are very well-positioned in this business for the balance of the year.
“We have right-sized all the inventory levels at JC Penney and readjusted our sales estimates for the balance of the year.”
But, despite these caveats, the overall picture for PVH remains overwhelmingly positive, with positive signs early in the third quarter, including that 8-9% revenue increase for Tommy Hilfiger, matched by similar trends for Calvin Klein, plus low single-digit comps increases for Heritage, in line with expectations.
And that led Chirico to a positive summing up of the state of affairs at the apparel giant: “We are seeing no indication of slowdown or cancellation with any major European customers and feel very good about our current European sell-throughs.
“The fall selling season is off to a strong start.”
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