) has again posted better-than-expected quarterly results. The
company's third-quarter fiscal 2013 adjusted earnings of $2.30
per share beat its own guidance of $2.25 and the Zacks Consensus
Estimate of $2.26. The upside was primarily driven by strong
revenue growth from the acquisition of The Warnaco Group, Inc.
and improved margins.
However, earnings fell 3.4% from the year-ago comparable
quarter figure of $2.38 per share as the benefit of strong
revenue growth from The Warnaco Group acquisition was offset by
rise in input and operating costs, higher effective tax rate and
a 12% rise in the number of outstanding shares.
Despite posting better-than-expected quarterly results, PVH
Corp. has slightly lowered its revenue guidance while reaffirming
the earnings guidance, which is much below the consensus
estimate. This spread negative sentiment among investors and led
the company's share price to fall 1.3% in the after-hours trading
Further, including one-time items such as acquisition,
integration and restructuring costs related to The Warnaco Group
and loss on sale of G. H. Bass & Co., PVH Corp. reported
earnings of $2.37 per share, as against $2.27 earned in the
comparable year-ago period.
Quarter in Detail
In the quarter, PVH Corp.'s total revenue rose 37.5% to
$2,259.1 million from $1,642.8 million in the prior-year quarter.
The year-over-year increase in revenues was attributable to
robust sales performances across all segments of the
company. Moreover, quarterly revenues surpassed the Zacks
Consensus Estimate of $2,222.0 million.
PVH Corp.'s adjusted operating profit rose 20.2% to $305.5
million from $254.1 million in the year-ago comparable quarter.
However, the company's operating margin contracted 200 basis
points (bps) to 13.5% from the year-ago period. The
year-over-year decline in operating margin was primarily due to
lower gross margin and increased selling, general and
administrative (SG&A) expenses as a percentage of sales,
which more than offset the positive impact of The Warnaco Group
From the beginning of first-quarter fiscal 2013, PVH Corp. has
decided to report its financial results under three business
segments: a) Calvin Klein, which includes Calvin Klein North
America and Calvin Klein International segments; b) Tommy
Hilfiger consisting of Tommy Hilfiger North America and Tommy
Hilfiger International businesses; and c) Heritage Brands, which
comprises Heritage Brands Wholesale and Heritage Brands Retail
's revenues increased more than twofold to $799.7 million from
$319.6 million in the year-ago quarter. This year-over-year
revenue growth was driven by The Warnaco Group acquisition and a
3% rise in comparable-store sales (comps) at PVH Corp.'s Calvin
Klein North America retail business. However, comps at the
company's Calvin Klein International segment dropped 1%.
The segment's adjusted operating profit rose 56.1% to $144.2
million from $92.4 million, primarily driven by The Warnaco Group
acquisition, strong sales at Calvin Klein's North America segment
and an improved gross profit resulting from higher average unit
retail selling price.
Revenues at the company's
segment increased 10.4% to $920.7 million from $833.6 million in
the year-ago period due to sales growth of 10% in the North
American business and 11% in international business. The
segment's North American business mainly benefited from a 3% rise
in retail comps, along with square footage expansion and
double-digit sales growth in the wholesale sportswear business.
Further, double-digit sales growth in the European wholesale
business, 4% comps growth in the European retail business and
retail square footage expansion drove the segment's international
The segment's adjusted operating profit grew 6.1% to $143.2
million from $135.0 million in the third quarter of fiscal 2012.
The increased operating profit was due to the above-mentioned
segment's revenues increased 10.1% year over year to $538.8
million from $489.5 million in third-quarter fiscal 2012. The
rise was primarily driven by the newly acquired Speedo swim
product and Warner's and Olga women's intimate apparel
businesses, partially offset by negative impact due to the
company's exit from Izod women's wholesale sportswear business
and a 3% decline in comps.
However, adjusted operating profit fell 11.7% year over year
to $41.7 million, due to revenue decline for the pre-acquisition
of Heritage Brands businesses and lower gross margins experienced
in the Bass retail business.
The company ended the quarter with $542.5 million of cash and
cash equivalents compared with $276.6 million at the end of third
quarter fiscal 2012. PVH Corp.'s long-term debt excluding current
maturities increased over twofold to $4,174.6 million primarily
due to The Warnaco Group acquisition. The company's shareholder
equity was $4,335.6 million at the end of third-quarter fiscal
Despite posting better-than-expected third-quarter results,
PVH Corp. remains cautious about the remaining period of fiscal
2013 since it anticipates intense competition and promotion by
retailers in the holiday season. Therefore, the company has
lowered the fiscal 2013 revenue guidance to $8.24 billion from
$8.25 billion projected earlier.
The company's Calvin Klein, Tommy Hilfiger and Heritage Brands
are expected to contribute $2.79 billion, $3.44 billion and $2.01
billion, respectively toward total revenue. Moreover, the company
still expects fiscal 2013 adjusted earnings to come in at $7.00
per share. Currently, the Zacks Consensus Estimate stands at
$7.07 per share, which may see revision in the coming days.
PVH Corp. intends to repay about $450 million of debt and
projects total interest expense of $190 million in fiscal 2013.
The tax rate is likely to be nearly 26.0%.
For fourth-quarter fiscal 2013, the company expects total
revenue of $2.08 billion with Calvin Klein, Tommy Hilfiger and
Heritage Brands contributing approximately $680 million, $910
million and $490 million, respectively.
The company anticipates interest expense of nearly $50 million
and tax rate of approximately 27.0%. Moreover, PVH Corp. intends
to make term loan payment of about $250 million in the
Based on the above-mentioned assumption, PVH Corp. expects
fourth-quarter fiscal 2013 adjusted earnings to come in at
approximately $1.40 per share. Currently, the Zacks Consensus
Estimate is $1.54 per share, which may see revision in coming
Other Stocks to Consider
Currently, PVH Corp. carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the apparel retail industry include
Columbia Sportswear Co.
Michael Kors Holdings Ltd
). All these have a Zacks Rank #2 (Buy).
COLUMBIA SPORTS (COLM): Free Stock Analysis
MICHAEL KORS (KORS): Free Stock Analysis
PVH CORP (PVH): Free Stock Analysis Report
QUIKSILVER INC (ZQK): Free Stock Analysis
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