Phillips-Van Heusen Corporation (PVH)
Q3 2012 Earnings Call
November 28, 2012, 09:00 am ET
Manny Chirico - Chairman and CEO
Mike Shaffer, EVP and COO and CFO
Dana Perlman - Treasurer and Head of IR
Ken Duane - CEO, Wholesale Apparel
David Glick - Buckingham Research
Christian Buss - Credit Suisse
Omar Saad - ISI Group
Erinn Murphy - Piper Jaffray
Diana Katz - Lazard Capital Markets
Dave Weiner - Deutsche Bank
Previous Statements by PVH
» Phillips-Van's CEO Discusses Q2 2012 Results - Earnings Call Transcript
» PVH Corp's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Phillips-Van Heusen's CEO Discusses Q4 2011 Results - Earnings Call Transcript
The information made available on this webcast and conference call contains forward-looking statements that reflect PVH’s view as of November 27, 2012 of future events and financial performance. These statements are subject to risks and uncertainties indicated in the company’s SEC filings and the Safe Harbor statement included in the press release that is the subject of this webcast and call. These risks and uncertainties include the company’s right to change its strategies, objectives, expectations and intentions and its need to use significant cash flow to service its debt obligations.
Therefore, the company’s future results of operations could differ materially from historical results or current expectations. The company does not undertake any obligation to update publicly any forward-looking statements including without limitation any estimate regarding revenue or earnings. The information made available also includes certain non-GAAP financial measures as defined under SEC rules. Reconciliation of these measures are included in the third quarter earnings release which can be found on the www.pvh.com and the company's current report on Form 8-K furnished to the SEC in connection with that release.
At this time I'm pleased to turn the conference over to Mr. Manny Chirico, Chairman and CEO of PVH Corp. and Mr. Mike Shaffer, Executive Vice President and Chief Operations and Financial Officer. Please go ahead, gentlemen
Thank you, Kelly. Good morning everyone and thank you for joining us. Joining me on the call as Kelly says Mike Shaffer, our Chief Financial Officer; Dana Perlman, our Treasurer and Head of Investor Relations and Ken Duane, who runs our wholesale businesses in North America.
I will start by saying, we are very pleased with our results for the quarter which we updated due to the Warnaco acquisition three times during the third quarter. We beat the top end of our guidance by $0.04, and given the momentum in the business, we also increased our full year 2012 earnings guidance to $6.37 to $6.38 a share.
Let me get into the businesses. I will start with the Tommy Hilfiger business, which continued its strong performance during the quarter. We posted a 1% revenue increase and a 16% increase in operating income. When you take out the foreign currency headwinds, our operating performance was even stronger. On a constant currency basis, revenues were up about 6% and operating income for the quarter was up over 25%.
Moving to the international businesses of Tommy; internationally revenues were up 4% in local currencies, our retail comps in Europe posted a 14% increase, while European wholesale sales were flat for the quarter. Geographically in Europe we continue to see strong growth in Central and Northern Europe with particular strength in France, Germany and Turkey, partially offset by softness in Southern Europe in the markets of Spain and Italy.
Our business in Japan continues to struggle with negative comps and operating income declined, as we reposition the brand to a more premium position. We expect these trends in Japan to continue into the fourth quarter and to the first half of next year, as this market is being repositioned upwards from premium position because it’s the gateway to Asia.
Moving to North America, we posted an 8% revenue increase for the quarter, driven by a 9% comp store increase in our retail business and mid-single digit growth in our wholesale businesses. We continue to see momentum in the North American business and strongly believe that the significant investments we are making in product, in our stores, in our shop presentations and in our marketing programs are paying dividends for us.
We have seen average unit retails increase about 10% over the last 12 months at both wholesale and retail. Most importantly in North America for the nine months of 2012, we have seen sales increase 10% and operating income grow by over 50%, which we believe quantifiably demonstrates that these investments we are making are paying off.
Moving to our Calvin Klein business; we continue to exceed our financial guidance here and post strong results. Total revenues in the third quarter for the combined Calvin Klein businesses were up 6%, while operating income was up 7% despite overall softness in the global jeans and women’s underwear business. These increases that we have experienced were driven by our Calvin Klein North America retail and wholesale businesses, which posted 13% revenue increase.
The Calvin Klein brand posted revenue increases in all geographic regions with the exception of Europe. Specifically by region, North American sales were up 3% with all product categories posting strong results with the exception of jeans and women’s underwear which were down double-digits. Asia sales were up 13% driven by double-digit growth in China, Honk Kong and India partially offset by weak sales in Korea.