Phillips-Van Heusen Corp rode improved returns on its Calvin Klein business to higher third-quarter profits despite decreases in its dress business as a result of the Federated-May combination.


Its earnings report released late Monday (20 November) was filled with special items, among the most dramatic being the itemisation of expenses this year related to the sudden departure of former chief executive officer Mark Weber. The report put associated costs at US$10.5m on a pre-tax basis, a figure expected to extract $6.6m after full-year taxes.


Net income available to common shareholders rose 37% to $50.8m, or 89 cents a diluted share, from $37.1m, or 73 cents, in the 2005 quarter. EPS finished 5 cents ahead of the average estimate of analysts. Total revenues, including royalties, were up 6.6% to $568.3m from $533.2m.


While operating earnings for wholesale and retail operations rose 16.6% to $70m, those for the Calvin Klein unit escalated nearly twice as fast, growing 31.1% to $27.7m.


The company's outlet stores enjoyed an 11% increase in same-store sales during the quarter.


The decline in dress shirt business was characterised as "anticipated" and part of "the residual impact of the Federated/May door closings for the year." The company's sportswear operations all registered gains in sales.


Emanuel Chirico, CEO of the New York-based firm, said in a statement: "During this upcoming holiday season, we are planning a $20m increase in national advertising to support our Calvin Kelin, Van Heusen, Izod and Arrow brands. We believe that in the context of the changing retail landscape it is critical to take our message directly to consumers."


In the fourth quarter, EPS is projected to reach 43 cents a diluted share. The figure is 2 cents above last year's comparable period, but 7 cents ahead of non-GAAP EPS from last year, in which special items are stripped away.


For the year to date, PVH's GAAP net income available to common shareholders was up more than 80% to $114.3m, or $2.19 a diluted share, versus $62.8m, or $1.44, in 2005. Total revenues picked up 5.9% to $1.53bn from $1.45bn.


Extraordinary items had no effect on quarterly earnings in the most recent quarter, but added 2 cents a share to EPS in the prior-year quarter. For the nine months, special items added 3 cents to 2006 EPS but reduced the year-ago figure by 8 cents.


By Arnold J Karr.