Phillips-Van Heusen Corporation (PVH)
Q2 2011 Earnings Conference Call
August 31, 2011 09:00 ET
Manny Chirico – Chairman and Chief Executive Officer
Mike Shaffer – Chief Financial Officer
Allen Sirkin – President and Chief Operating Officer
Ken Duane – Vice Chairman, North American-Wholesale
Dana Perlman – Treasurer and Head of Investor Relations
Kate McShane – Citi Investment Research
David Glick – Buckingham Research Group
Bob Drbul – Barclays
Adrianne Shapira – Goldman Sachs
Jeff Klinefelter – Piper Jaffray
Robby Ohmes – Bank of America/Merrill Lynch
Evren Kopelman – Wells Fargo
Howard Tubin – RBC Capital Markets
Eric Beder – Brean Murray
Omar Saad – ISI Group
Carla Casella – JPMorgan
Dave Weiner – Deutsche Bank
Previous Statements by PVH
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Good day, everyone and welcome to this PVH Corp Second Quarter 2011 Earnings Conference Call. This webcast and conference call is being recorded on behalf of PVH and consist of copyrighted material. It may not be recorded, reproduced, retransmitted, rebroadcast, downloaded, or otherwise used without PVH’s express written permission. Your participation in the question-and-answer session constitutes your consent to having any comments or statements you make appear on any transcripts or broadcast of this call. The information made available on this webcast and conference call contains certain forward-looking statements, which reflects PVH’s view of future events and financial performance as of August 30, 2011.
Any such forward-looking statements are subject to risks and uncertainties indicated from time-to-time in the company’s SEC filings. 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 revenues 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 am pleased to turn the conference over to Mr. Manny Chirico, Chairman and CEO. Please go ahead sir.
Manny Chirico – Chairman and Chief Executive Officer
Thank you very much. Good morning everyone. Joining me on the call this morning is Mike Shaffer, our Chief Financial Officer; Allen Sirkin, our President and Chief Operating Officer; Ken Duane, who runs all of our North American Wholesale businesses; and Dana Perlman who is our Treasurer and Head of Investor Relations.
We’re very pleased with the results that we reported for the second quarter and our ability to take up the projections for the year 2011. I am going to start with the Calvin Klein businesses and more or less try to give you a little bit of update of the trends of business as we see them in the second quarter. Mike will then quantify the results in the second quarter and then I’ll come back and just talk about some of the trends we see in the early part of third quarter.
Our Calvin Klein business continued its strong growth momentum in the quarter. Total revenues in the second quarter for the combined Calvin Klein business is up 19% and our operating profits increased over 20%. The CK apparel business wholesale and retail that we are running in North America, those businesses posted a 21% sales increase in the quarter. The strong performance was driven by our men’s wholesale sportswear business as well as a very strong performance in our own retail stores in North America. Our Calvin Klein retail business has posted a 21% comp store increase in the quarter.
In our licensing segment, royalty revenues were up 12%. I’ll put some color on some of the larger businesses. Our underwear business was ahead about 14% worldwide. All regions in the quarter, North Asia and the Americas posted double-digit sales increases. The growth was driven by the continued growth of international retail square footage and the extremely strong performance of CK One. CK One product has been supported by a significant marketing campaign and marketing investment through the first half of the year. CK One is the largest launch in the brand’s history and retail results have been strong in all markets.
In men’s, CK One continues to exceed our plans and has helped us to grow and maintain our number one position within U.S. department stores. CK One is expected by the end of the year to represent about 10% of our total men’s underwear business.
On the jeans side, our jeans-related businesses were up about 8% for the quarter fueled by the strong growth internationally, Latin America, Asia, and Europe. Overall, our international jeans business grew over 20% while our domestic jeans business was down about 8%. The jeans business in the United States continues to be under pressure overall and we see our men’s business outperforming our women’s business within the United States.
Moving on to fragrance, our Coty fragrance business had a strong quarter posting a 10% increase in revenues. Business was very good across the board with our Euphoria Calvin Klein Beauty and CK One fragrances continuing their strong growth momentum. In the third quarter, we’ll have the major product launch with CK One shock. It will be supported by strong marketing campaign. It will be a global launch. Product has begun shipping in early August. We’ll see much more of a presence as we step into September and going into the full holiday selling season. So, we have very high expectations to CK One. We see excellent placement of the product. We think the marketing campaign, which started in the first half of the year around CK One will accelerate in fragrance in the second half of the year and we are very positive as we see that business going forward.
In our North American women’s apparel and related accessory business, we had very strong performance in the quarter. Our revenues were up in excess of 15% for the quarter in those combined categories. On the apparel side, the growth is being fueled by strong selling of women’s sportswear and dresses as well as good performance in the outerwear category and we’ll get a better view into the outerwear category as we really get into the third quarter this year. We have very strong placement across the board.