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Q1 2013 Earnings Call
June 13, 2013 8:30 am ET
Emanuel Chirico - Chairman and Chief Executive Officer
Michael A. Shaffer - Chief Operating & Financial Officer and Executive Vice President
Dana M. Perlman - Senior Vice President of Business Development & Investor Relations and Treasurer
Robert S. Drbul - Barclays Capital, Research Division
David J. Glick - The Buckingham Research Group Incorporated
Christian Buss - Crédit Suisse AG, Research Division
Kate McShane - Citigroup Inc, Research Division
Erinn E. Murphy - Piper Jaffray Companies, Research Division
Eric M. Beder - Brean Capital LLC, Research Division
Evren Dogan Kopelman - Wells Fargo Securities, LLC, Research Division
John D. Kernan - Cowen and Company, LLC, Research Division
Howard Tubin - RBC Capital Markets, LLC, Research Division
Robert F. Ohmes - BofA Merrill Lynch, Research Division
Previous Statements by PVH
» PVH Management Discusses Q4 2012 Results - Earnings Call Transcript
» Phillips-Van Heusen Corporation CEO Discusses Q3 2012 Financial Results - Earnings Call Transcript
» Phillips-Van's CEO Discusses Q2 2012 Results - Earnings Call Transcript
The information made available on this webcast and conference call contain forward-looking statements that reflect PVH's views as of June 12, 2013, 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 needs to use significant cash flow to service its debt obligations. Therefore, the company's future results of operations could differ materially from historic results or current expectations. PVH does not undertake any obligation to update publicly any forward-looking statement, including, without limitation, any estimate regarding revenue or earnings.
Generally, the financial information and guidance provided is on a non-GAAP basis as defined under SEC rules. Reconciliation of GAAP are included in the first quarter earnings release, which could be found on www.pvh.com and the company's current report on Form 8-K furnished to the SEC in connection with the release.
At this time, I am pleased to turn the conference over to Mr. Manny Chirico, Chairman and CEO of PVH.
Thank you very much. Good morning, everyone, and welcome to our call. Joining me on the call are Mike Shaffer, our Chief Financial Officer; Dana Perlman, our Treasurer, Senior Vice President of Investor Relations; and Ken Duane, who runs our -- all of our wholesale businesses in New York and our Heritage businesses throughout North America, as well as all of our wholesale businesses throughout North America.
Just some general comments. We're very pleased with the first quarter results. We significantly beat our first quarter revenue and earnings guidance. We saw a strong outperformance against our projections in both Calvin Klein and Tommy Hilfiger businesses, as well as in our Heritage wholesale businesses. We are going into the second quarter with a significant amount of momentum.
Let me start with the Tommy Hilfiger business to give you an overview. In the Tommy Hilfiger business, we continue to see strong performance during the quarter, posting a 5% revenue increase and a 15% operating income increase over the prior year. In North America, revenues were up 14%, driven by a 5% comp store increase at retail, square footage growth in our retail business and overall very strong performance in our wholesale businesses. We continue to see momentum in the North American business and strongly believe that the significant investments that we're making in product, in our stores, in-shop presentations and in our marketing program are paying huge dividends for us. Second quarter sales trends to date are strong. We've seen our retail sales comp performance accelerate, posting an 8% to 9% increase so far through the second quarter.
Moving to the International component of the Tommy business. Revenues were flat for the quarter. Revenue growth in Europe was offset by a continued weakness in our Japan business. Our retail comps in Europe posted a 4% increase. Looking at the second quarter sales trend in Europe, comps continue to run up, about 3% to 4%. We also see our fall and now our holiday sales bookings coming in at about a plus-10% growth over the prior year. Geographically, we continue to see strong growth in Central and Northern Europe, with particular strength in Germany, France and Russia, partially offset by softness in Southern Europe, which would be particularly Spain and Italy.
Moving to our Heritage businesses. Our wholesale Heritage businesses continued their strong performance. Sales came in ahead of our estimates, as strong spring selling resulted in our wholesale customers accelerating shipments into the first quarter. We also saw a strong performance in our newly acquired Speedo and Core Intimate business units.
Overall, first quarter operating margins dramatically improved to 12.8% for the wholesale Heritage businesses. This margin expansion resulted from a significant improvement in sportswear margins, driven by strong sell-throughs at retail and higher average unit selling prices. Second quarter sales trends have continued to be strong in May, and inventory levels are quite clean. We are well-positioned for a strong Father's Day and overall second quarter.
Our performance in our Heritage retail businesses was disappointing. Comp sales were minus 7% and were particularly weak in our Bass division. Second quarter sales trends continued to be soft, and we are not anticipating any significant improvement in this business until we get to the third quarter back-to-school selling season.