US: PVH expects profit to be hit by extra Warnaco investment
- Fourth quarter net income reached US$80.7m from $35.5m
- Revenue was up 7% to $1.6bn
- Full-year net income rose to $433.8m from $275.6m
- Revenue was up 2.4% to $5.54bn
The company said it estimates that earnings before interest and taxes on a non-GAAP basis will be approximately 20% lower than its original plan, driven by additional investments in developing the brands acquired through the Warnaco buy.
PVH chairman and CEO Emanuel Chirico said that after owning the Warnaco business for about 45 days, PVH believes that "additional investments above our initial expectations are required to achieve our goal of rebuilding the global Calvin Klein jeanswear and underwear businesses".
Investments are set to include enhancing the existing systems and supply chain infrastructure; upgrading the Calvin Klein jeanswear product design and quality with an emphasis on geographic differentiation and investing in in-store marketing and the in-store customer experience.
It will also fill key design, marketing and merchandising positions; rationalise global excess inventory levels; and reduce and restructure the off-price and club sales distribution in Europe and North America.
The comments came as the company, which also owns the Tommy Hilfiger brand, recorded a jump in net income over the fourth quarter, ended 3 February, to reach US$80.7m from $35.5m in the same period of the prior year.
Revenue grew 7% over the quarter to $1.6bn, including a 3% negative impact attributable to the exit from the Izod women's and Timberland wholesale business.
In the Tommy Hilfiger brand, revenue increased 9% to $891.1m. In the Tommy Hilfiger North America business, revenue grew 11%, with 5% comparable sales growth in the retail business. Internationally, Tommy Hilfiger revenue increased 8%, driven by a comparable store sales increase of 9% in Europe and strength in the European wholesale business. However, this was partially offset by continued weakness in Japan.
Calvin Klein revenue grew 14% to $317.4m, primarily due to strong growth in the North American wholesale business, new store openings within its outlet retail business. However these increases were partially offset by 2% comparable store sales decline in the company's North American outlet retail business.
However the company's heritage brands business saw revenue decline 2% to $427.7m,, due to a $30m impact from exiting the Izod women's and Timberland wholesale sportswear businesses. Excluding the impact of exited businesses, the division saw revenue increase 4%.
Commenting on the results, Chirico said: "At the core of our success and our opportunity is the power of our global designer lifestyle brands, Calvin Klein and Tommy Hilfiger. 2013 will be a transitional year for PVH, during which we will build the foundation for long-term sustainable growth for our businesses across the world. I believe we will emerge stronger and the investments we will make this year will help drive the Calvin Klein business going forward."
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