Tommy Hilfiger and Calvin Klein struggle in North America
In the first quarter of its 2015 fiscal year, the company PVH saw its revenues decline by 4% (+3% on a constant currency basis), compared to the same period last year.
For its quarter ending on May 3, it generated 1.879 billion dollars in revenue. While the company explained that the decline was even less than expected, its retail business over the course of the three months was nonetheless interesting.
That’s because, during the quarter, the company’s two flagship brands, Calvin Klein and Tommy Hilfiger, reported declines not solely due to the application of exchange rates. Calvin Klein recorded a turnover of nearly 654 million dollars as compared to 665 million one year earlier, down 2% (+5% on a constant currency basis). Its international business went from 328 to 315 million dollars, while it remained stable in North America, going from 338 to 339 million dollars.
But the company emphasized that, while its international retail business grew by 10% on a constant currency basis, with help from the Chinese New Year, it fell in North America by 1%.
For Tommy Hilfiger, the situation is a bit more painful. The brand’s sales fell by 11% (+1% on a constant currency basis) to 767 million, with a decline in international revenue from 500 to 413 million dollars and a decline in North American revenue from 362 to 354 million.
As for direct sales, international in-store sales rose by 2% on a comparable basis and declined by 3% in its North American stores. The company believes that the decline is due to the fall in the number of tourists visiting its flagship locations.
Finally, for once, the group’s most dynamic division was its Heritage brands. Buoyed by a shift in the timing of its wholesales shipments into the first quarter, and a retail comparable store sales increase of 14% for the brand Van Heusen, it recorded a turnover of 458 million dollars as compared to 436 million dollars one year earlier.
During the quarter, the group nevertheless recorded strong profits. Its Ebit went from 84 to 177 million dollars. The progress was primarily due to the absence in 2015 of 93 million dollars of debt modification and extinguishment costs and a reduction in Warnaco integration and restructuring costs compared to the prior year’s first quarter.
The group has thereby delivered an earnings forecast that has been revised upward for the entirety of its fiscal year. On a constant currency basis, it expects a 1% decline in revenues for Calvin Klein, 7% for Tommy Hilfiger and 3% for its Heritage division.
Finally, its turnover is expected to decline by 3%. PVH has announced that its board of directors has voted to approve a $500 million three-year stock repurchase program over three years.
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