PVH Corp. adopted what it called a “prudent approach” to 2015 as it prepared to face fierce currency headwinds that are expected to subtract more than $100 million from its 2015 net income and lead to a decline in its reported revenues.
The New York-based owner of Calvin Klein and Tommy Hilfiger, which finished the 2014-15 fiscal year with $8.24 billion in revenues, expects currency fluctuation, coupled with political and economic instability in the Russian market, to deplete first-quarter earnings by about 30 cents a share and full-year EPS by about $1.30.
The pressures of the strengthening dollar didn’t prevent the firm from delivering better-than-expected fourth-quarter results, even as revenues fell slightly below the consensus estimates of analysts.
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In the three months ended Feb. 1, PVH generated net income of $51.5 million, or 62 cents a diluted share, versus a loss of $37.5 million, or 46 cents, in the year-ago quarter. On an adjusted basis, eliminating special items including costs for the integration of the Warnaco business, EPS came to $1.76, 3 cents higher than the consensus estimate of analysts.
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Revenues moved up to $2.07 billion from $2.05 billion, a 0.8 percent increase on a reported basis that represented a 5.5 percent boost at constant currency. Wall Street expected revenues to reach the $2.1 billion plateau.
The Tommy Hilfiger business reported $919.4 million in revenues, up 1.9 percent from $901.9 million a year ago and a 9.2 percent increase at constant currency. Calvin Klein hit $702.7 million, up 2.1 percent from $688.5 million and ahead 6.1 percent without currency fluctuation. A slump in dress shirts pulled down Heritage Brands’ volume to $446.7 million, 3.3 percent below the $461.9 million reported in the final quarter of 2013.
Hilfiger’s North American comparable-store sales were “relatively flat” although wholesale revenues benefited from a shift to fourth-quarter shipments from the third quarter. Calvin Klein performance was highlighted by strength in the underwear business despite a flat performance for North American comps for the brand.
“The strength of the U.S. dollar relative to other major currencies in which we conduct business and the volatile global macroeconomic environment is expected to have a significant negative impact on our 2015 results,” said Emanuel Chirico, chairman and chief executive officer of the company. “Nonetheless, we expect that our global lifestyle brands, Calvin Klein and Tommy Hilfiger, will continue to demonstrate strong underlying performance globally.”
In providing guidance for the new year, PVH said it expected EPS of between $6.75 and $6.90, excluding a $1.30 negative currency impact. Overall revenues is expected to grow 3 percent on a constant currency basis but decline 4 percent excluding currency fluctuation.
Wall Street took those numbers in stride, sending PVH shares up 1.3 percent to $105.40 in after-hours trading following the 4 p.m. disclosure of results and guidance. The stock rose 0.4 percent to $104.03 during the regular trading session.
By business unit, Tommy Hilfiger’s revenues are expected to decline 7 percent on a reported basis while increasing about 3 percent at constant currency. Calvin Klein, with slightly less international exposure, is expected to report essentially flat sales while growing 5 percent when currency effects are excluded.
The Heritage business, substantially smaller with the exit of the Izod retail business and the sale of the G.H. Bass business to G-III Apparel Group Ltd. 15 months ago, is expected to report sales about 4 percent lower than in 2014, when revenues declined to $1.8 billion.
For the full year, PVH reported net income of $439 million, or $5.27 a diluted share, triple the 2013 amount, and a 0.7 percent increase in revenues to $8.24 billion.
The company will hold a conference call this morning to discuss the results and guidance.