Phillips-Van Heusen Corporation (PVH)
Q2 2012 Results Earnings Call
August 28, 2012 9:00 AM ET
Manny Chirico - Chairman and CEO
Mike Shaffer - Chief Financial Officer
Dana Perlman - Treasurer and Head, Investor Relationships
Ken Duane - CEO, Wholesale
Jess Schoen - Barclays Capital
David Glick - Buckingham Research Group
Adrianne Shapira - Goldman Sachs
Christian Buss - Credit Suisse
Kate McShane - Citi Investment Research
Omar Saad - ISI Group
Evren Kopelman - Wells Fargo
John Kernan - Cowen & Company
Howard Tubin - RBC Capital Markets
Joseph Parkhill - Morgan Stanley
Diana Katz - Lazard Capital Markets
Matthew Boss - JP Morgan
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Good day, everyone. And welcome to today’s PVH Corp. Second Quarter 2012 Earnings Conference. This webcast and conference call is being recorded on behalf of PVH Corp. and consist of copyrighted material. It may not be recorded, rebroadcast 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 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 as of August 27, 2012 of future events and financial performance. These statements are subject to risks and uncertainties indicated 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 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, it’s vulnerability to weather, economic conditions, fuel prices, fashion trends, lost of retail accounts, epidemics, war, terrorism, availability of raw materials and other factors. It’s reliance on the sales of its business partners and it’s 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. 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 company’s earnings release which can be found on the company’s website www.pvh.com and its current report on Form 8-K furnished to the SEC in advance of this webcast and call.
On the call with us today is, Mr. Manny Chirico, Chairman and CEO. Please go ahead, sir.
Thank you, Dana. Joining me on the call today is Mike Shaffer, our Chief Financial Officer; Dana Perlman, our Treasurer and Head of Investor Relationships; and Ken Duane, who runs, CEO and runs all of our Wholesale businesses in the United -- in North America.
In general, we’re very pleased with the results for the quarter. Just to summarize, we beat our top end of the second quarter earnings guidance by about $0.05 and given the momentum we’ve seen in our business, we’ve also increased the top end of our 2012 earnings guidance by $0.07 for the year to $6.25 to $6.32.
Getting into our major businesses, I’m going to start with the Tommy Hilfiger business. The Tommy Hilfiger business continued its strong performance during the quarter, posting a 4% revenue increase and a 28% increase in operating income.
When you take out the foreign currency headwinds, our operating performance was outstanding on a constant currency basis. Revenues were up 10% and operating income was up over 34% for the quarter.
Let me focus on the International business of Tommy. Revenues internationally were 9% local currency. Our retail comps in Europe posted a 15% increase for the quarter, while wholesale revenues were up 9%.
Geographically, 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 European market with particular focus on Spain and Italy.
Moving to North American where we posted 11% revenue increase for the quarter, that was driven by 11% comp store increase in our retail businesses and high single-digit growth in our wholesale businesses. We continue to see momentum in North America and strongly believe that the significant investments we are making in product 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. We continue to elevate product and gain additional four space at top doors in Macy’s, which is helping fuel the brand exposure.
We strongly feel that our in-store presentations and product initiatives will be fully in place in the second half of this year. And we believe we’re well positioned to continue to exceed our plans in North America for the balance of the year.
For 2012, we are planning our overall Tommy revenues to grow 7% to 8% on a constant currency basis. Given the uncertain economic environment, we are planning our revenue growth for the balance of the year more conservatively than current trends would indicate.
Moving to Calvin Klein, the Calvin Klein business continues to exceed our financial guidance and post strong results. Total revenues in the second quarter for our combined Calvin Klein businesses were up 5% despite overall softness in the global jeans and women’s underwear businesses.
This increase was driven by our Calvin Klein North American retail business, which posted a 5% comp store increase. For the year, we are planning our total North American Calvin Klein wholesale and retail businesses to grow about 10%. This will be driven by a mid-single digit comp store increase and growth in square footage at both wholesale and retail.