Calvin, Superba Propel PVH in Q1
NEW YORK – Phillips-Van Heusen late Tuesday reported sharply higher first quarter earnings that were bolstered by continuing growth from its Calvin Klein license portfolio and a better than expected performance from its Superba acquisition.
In the three months ended May 6, the New York-based apparel marketer and retailer achieved net income of $53 million, up 8.7% from its year-ago earnings of $48.7 million and up 27.6% from its non-GAAP (generally accepted accounting principles) earnings of $41.6 million. Earnings per diluted share landed at $0.92 versus $0.87, on a GAAP basis, in the 2006 quarter. The EPS figure was $0.07 above PVH’s most recent estimate of $0.85 and $0.06 above analysts’ consensus estimates.
Total revenues crossed the quarterly finish line at $591.9 million, 16.9% above the year-ago mark of $506.4 million. Net sales were up 14.6% to $520.5 million, but royalty revenues shot ahead 30.2% to $51.6 million and advertising and other revenues skyrocketed 57.3% to $19.8 million.
The principal propellant in the boost in royalties was a 37.2% increase in revenues from Calvin Klein licensing, which reached $45.2 million. PVH attributed the pace of growth both to the introduction of CKIN2U and the continuing strength of the Euphoria brand.
The increase in royalties also helped drive a 150 basis point increase in gross margin, to 49.4% of revenues from 47.9%, which more than offset a decrease in margins in the company’s wholesale sportswear business.
Emanuel Chirico, chief executive officer, commented, “Despite the challenges the overall retail environment has been experiencing, we were able to exceed our previous earnings guidance. Our diversification strategy of marketing our nationally recognized brands across multiple channels of distribution is working and continues to benefit our bottom line.
“The global demand for the Calvin Klein brand continues to grow as we add new product categories and enter new markets,” he continued. “This comes in addition to strong growth in the Calvin Klein brand’s largest businesses – fragrance, jeans and underwear.”
He also noted the performance of the Superba neckwear business, acquired earlier this year, “has exceeded our expectations” and reiterated PVH’s intention to add neckwear brands to its new franchise and to explore opportunities to market dress shirts and neckwear together.
PVH is the largest supplier of dress shirts in the US.
The company’s outlet stores enjoyed a 7% increase in same-store sales, although PVH said that shifts in the calendar inflated that figure somewhat. Compared to the 13 weeks ended May 7, 2006, same-store sales were up 4%.
The company increased its annual EPS guidance to a range of $3.06 to $3.10 from its earlier estimate of $3.00 to $3.06. Second quarter guidance was set at $0.61, including $0.03 in charges, consisting of start-up costs for PVH’s Timberland wholesale venture and Calvin Klein better specialty stores as well as a gain from the release of cash held in escrow.
