PVH Corp Beats Q4 Guidance, Aided by Acquisition Cost and Revenues

PVH Corp

reported fourth quarter and full-year 2011 results earlier today, and raises guidance into 2012. The company's and revenue of $1.533 billion exceeded its own guidance for the fourth quarter, improving the top end by 8 cents. Non-GAAP $1.18 EPS represented a 27 percent increase over the comparable period in the prior year. In a GAAP basis, EPS of $1.11 was a higher 54-percent beat to last year's results. The beat was largely driven by a lower tax rate of 10.6 percent of 10.6 percent on a non-Gaap basis (previously $26 percent). Also, GAAP EPS was helped by prior year's restructuring charges. Interest rates were also lower by 6.1 million due to lower debt levels (net reduction of $233.2 million). Earnings before interest and taxes were flat to slightly down at $128.4 million compared to $129.4 million last year in the same quarter. A 6 percent improvement (to $70.2 million) at Calvin Klein and a 25 percent improvement at Tommy Hilfiger (to $70.3 million) were offset by a 62 percent decline (to $10.8 million) at Heritage Brands. Higher production costs, while slightly offset by price increases and operating efficiencies, were responsible for the flat EBIT, most prevalently at the Heritage Brands business. These were related to the aggressive markdowns on wholesale sportswear, which the company hopes helped the company get good positioning for 2012, as well as holiday-related promotions. Higher production cost offset healthy increases in aggregate revenues, which at $1.533 billion were 10 percent higher on 2010's fourth quarter, due to the net effect of a 16 percent increase in Tommy Hilfiger sales (to $278.5 million), 12 percent increase in Calvin Klein (to $815.8 million) and a decrease of 1 percent (to $438.5 million) in Heritage Brands. On a full year basis, GAAP earnings per share increased to $4.36 a share in 2011, up significantly from $0.80 for 2010. At $559.7 million, they were favorably impacted due to acquisition, integration and restructuring charges incurred with the Tommy Hilfiger business. The added revenue of the later also contributed significantly to the healthy beat. Calvin Klein and Heritage Brands also contributed business growth for the year. Given the acquisition impact of 2011 revenue growth, the company does not see this growth continuing into 2012. For the period, the company guides flat to 2 percent growth. Much of this projection includes planned headwinds to foreign currency translations, whose impact is estimated at 4 percent. The company does expect non-GAAP earnings to come in between $6.10 to $6.20. Most of the earnings growth is projected into the second half of the year, as production costs are expected to taper off around that time. Non-GAAP EPS for the first quarter is guided between $1.23 to $1.25 per share, flat compared to the $1.23 for the quarter on the prior year. This is due to production cost increases having their most severe effect in the first quarter, as this quarter has inventory from both Fall 2011 and Spring 2012 season. In the earnings call, CEO and Chairman Emanuel Chirico addressed concerns of projected comps of about 5-6 percent versus the ~16 percent in Q4. “A strong selling season means less inventory carryover in Q1. You can't sell goods twice, as they say,” says Chirico, pointing that there is less spring goods in the store, which will impact the first couple of months selling. He noted that 15 to 16 percent comparable store sales were unsustainable in the longer term. PVH shares are seeing slight rise in premarket, up 77 cents on yesterday's $89.91 close.