PVH Corp. (PVH)

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PVH Corp. (PVH)

Q3 2011 Earnings Call

December 1, 2011 4:45 PM ET


Manny Chirico – Chairman and CEO

Mike Shaffer – Chief Financial Officer

Allen Sirkin – President and COO

Ken Duane – Head, Wholesale Businesses

Dana Perlman – Treasurer and Head, Investor Relationships


Robert Drbul – Barclays Capital

Adrianne Shapira – Goldman Sachs

David Glick – Buckingham Research Group

Jeff Klinefelter – Piper Jaffray

Robert Ohmes – Bank of America

Maria Casper – Wells Fargo

Howard Tubin – RBC Capital Markets

Kate McShane – Citi

David Weiner – Deutsche Bank

Joseph Parkhill – Morgan Stanley



Please standby. We are about to begin. This webcast and conference call is being recorded on behalf of PVH Corp. and consist of copyrighted material. It may not be recorded, reproduced, retransmitted, rebroadcast, downloaded or otherwise used without PVH’s expressed written permission. Your participation in the question-and-answer session constitutes your consent to having any comments or statements you make appear on any transcript or broadcast of this call.

The information made available on this webcast and conference call contains certain forward-looking statements that reflect PVH’s view of future events and financial performance as of December 1, 2011. Any such statements are subject to risks and uncertainties indicated from time to time in the company’s SEC filings, including those identified in the company’s Safe Harbor statement that is part of the earnings press release that is the subject of this webcast and conference call.

These include the company’s right to change its strategies, objectives, expectations and intentions. It’s need to use significant cash flow to service its debt obligations, its vulnerability to weather, economic conditions, fuel prices, fashion trends, loss of retail accounts, disease epidemics or and terrorism, availability of raw materials and other factors, its reliance on the sales of its licensees and retail customers and its exposure to the behavior of its associates, business partners and licensers. Therefore the company’s future results of operations could differ materially from historical results or current expectations as more fully discussed in its SEC filings.

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. A reconciliation of these measures is included in the company’s earnings release which can be found on the company’s website www.pvh.com and in the company’s current report on Form 8-K furnished to the SEC in advance of this webcast and call.

At this time, I would like to turn the conference over to Chairman and CEO, Manny Chirico. Please go ahead.

Manny Chirico

Thank you, Robert. Joining me on the call this afternoon is Mike Shaffer, our Chief Financial Officer; Allen Sirkin, our President and Chief Operating Officer; Ken Duane, the Head of all our Wholesale Businesses; and Dana Perlman, our Treasurer and Head of Investor Relationships.

We’re very pleased with our results for the quarter. We beat the top end of our third quarter earnings guidance by $0.08. And given the momentum in our business we also took up the fourth quarter by raising our full year guidance by $0.13.

Okay. Let me start with our Calvin Klein business as I get into each of the individual components. Our Calvin Klein business continued its strong growth momentum. Total revenues in the third quarter for our combined Calvin Klein businesses were up 11% and operating profits increased 13%.

The Calvin Klein Wholesale and Retail businesses that we operate directly posted a 13% sales increase in the quarter. The strong performance was driven by our Men’s Wholesale Sportswear business, as well as very strong performance in our own retail stores. Our Calvin Klein Retail business posted a 12% comp store increase in the quarter.

In our Licensing segment, royalties were up 8%. The business posted strong revenue growth across all geographic regions specifically North America was up about a little bit more than 7%, Europe was up 8%, Asia sales were up about 18% and Latin America/South America were up just a little bit over 20%.

Moving on to some of our big categories and businesses, I’ll start with underwear. The Calvin Klein underwear business was ahead about 11% in the quarter with all regions, Europe, Asia and the Americas posting strong sales gains. This growth was driven by the continued growth of the international retail square footage and the extremely strong performance of CK One.

CK One’s retail results are strong in all markets. In men’s CK One continues to exceed our plans and has helped us to grow our number one share position within U.S. department stores. CK One currently represents over 10% of our annual underwear business.

In women’s, our Naked Glamour introduction is off to a strong start in all international markets. The supporting marketing campaign has been very well received, new product initiatives along side breakthrough marketing campaigns has been a hallmark of the Calvin Klein underwear business. This strategy has enabled us to grow our market position globally as the number one intimate apparel duel-gender brand.

Moving onto jeans. Our global jeans and related businesses were down 2% for the quarter. Relatively soft sales in the U.S. and Europe were offset by strong business throughout Asia and South America. For the fourth quarter, we expect the jeans business to grow in the mid single-digit range, driven by new products, particularly our Power Stretch program, which will be a significant initiative for the spring season.

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