Strong sales and higher margins in its apparel segment are behind a 40 per cent hike in third quarter earnings at Phillips-Van Heusen Corp.

Net income for the three-month period was $17.7 million, or $0.63 per diluted share, compared to $12.6 million, or $0.45 per diluted share in the same period last year.

The New York-based company, which makes clothing under its Van Heusen, Bass and Izod brands as well as licensed labels such as DKNY and Kenneth Cole, said net sales for the quarter rose 1 per cent to $409.1 million from $405 million a year earlier.

The company said in a statement that the increase in net income was boosted by a 39 per cent increase in operating earnings in its apparel segment, where sales were up 3 per cent.

This was partially offset by a 6 per cent sales decline and a 24 per cent drop in operating earnings in the footwear segment. A soft back to school selling season coupled with unseasonably warm weather throughout the early autumn season negatively impacted sales and gross margins as higher promotional markdowns were needed to drive footwear sales Phillips-Van Heusen said.

For the nine months, net income was $24.7 million, or $0.88 per diluted share, in the current year compared with $20.1 million, or $0.72 per diluted share, last year. Net sales were $1,089.7 million in the current year, compared with $1,106.3 million last year.

Bruce J Klatsky, chairman and chief executive officer, said the firm is being cautious in its view of the fourth quarter. "We are estimating fourth quarter sales to be flat to up 2 per cent, with earnings per share projected to be $0.15 to $0.20, compared with last year's $0.14.

"Accordingly, our 2002 earnings per share forecast remains at $1.03 to $1.08, compared with last year's $0.86, a 20 per cent - 26 per cent increase over last year."