On a non-GAAP basis, earnings before interest and taxes for the Tommy Hilfiger business increased 16% to $135.1 million from $116.2 million in the prior year’s third quarter, due to the net revenue increase discussed above and a significant improvement in gross margin driven by an increase in average unit retail selling prices and a decrease in product costs. Partially offsetting this increase was the negative impact of approximately $10 million related to foreign currency translation.
On a GAAP basis, earnings before interest and taxes for the Tommy Hilfiger business increased 42% to $128.8 million, as compared to $90.6 million in the prior year’s third quarter. This increase was due principally to the net impact of the overall revenue and gross margin increases noted above, combined with the absence of expenses incurred in connection with the Company’s buyout of the perpetual license for Tommy Hilfiger in India and a decrease in integration and restructuring costs.
Revenue in the Calvin Klein business increased 6% to $319.6 million from $301.2 million in the prior year’s third quarter, driven primarily by a 9% increase in comparable store sales within the Company’s Calvin Klein outlet retail business and an 11% increase in the North American wholesale business. These increases were partially offset by Calvin Klein royalty revenue, which was relatively flat to the prior year period. Fragrance, women’s sportswear, dresses, footwear and handbags continued to experience strong growth globally during the quarter, but were offset by a decline in royalty revenue related to the upcoming reacquisition of the European bridge apparel and accessories business and continued weakness in jeans and women’s underwear in Europe and the United States.Earnings before interest and taxes for the Calvin Klein business increased 7% to $92.4 million as compared to the prior year’s third quarter amount of $86.2 million, driven principally by the revenue increases discussed above, combined with an improvement in gross margin in the Company’s Calvin Klein apparel business and a shift in advertising expenses.