PVH Corp. raised its EPS guidance for the year after reporting sales in line and earnings above guidance in the third quarter. On a currency-neutral basis, sales were flat for the Tommy Hilfiger brand and grew 3 percent for Calvin Klein.

Revenue increased 4 percent to $2.363 billion and increased 1 percent on a constant-currency basis. Sales were in line with guidance of an increase of mid-single-digits (increase low single-digits on a constant-currency basis).

Earnings on a GAAP basis of $2.66 a share exceeded guidance of approximately $2.43. On a non-GAAP basis, EPS of $2.90 exceeded guidance of approximately $2.70. In the year-ago quarter, EPS was a loss of $2.88 on a reported basis and $2.60 on a non-GAAP basis.

Stefan Larsson, chief executive officer, commented, “We delivered another strong quarter, with high single-digit revenue growth for our direct-to-consumer businesses across Calvin Klein and Tommy Hilfiger, with growth in all regions, and we exceeded our EPS guidance. Through our disciplined PVH+ Plan execution, we are gaining increasing traction in our product category offense and hero products, our cut-through marketing campaigns, and building out our demand-driven supply chain. We expanded gross margin, improved inventory productivity and increased our marketing investments, driving strong consumer engagement and overall, significantly improved profitability. We continue to see incredible strength in our iconic brands as we tap into their beloved DNA and build them into the most desirable lifestyle brands in the world.”

Larsson added, “I’m especially pleased with the outperformance in North America as we made significant progress towards unlocking our full potential, delivering a 13.1 percent non-GAAP EBIT margin in the region for Calvin Klein and Tommy Hilfiger combined. Based on our solid year-to-date performance, we are raising our EPS guidance for the full year.”

Zac Coughlin, chief financial officer, said, “Our disciplined execution of the PVH+ Plan drove strong gross margin expansion and double-digit non-GAAP EPS growth in the third quarter. For the full year, we remain well-positioned to achieve a double-digit non-GAAP EBIT margin and have raised our EPS guidance. Reflecting our confidence, we have further increased our share repurchases to approximately $550 million this year. Through the PVH+ Plan, we are relentlessly focused on delivering strong profitability, significant cash flow, and attractive returns for our shareholders, while pursuing sustained, long-term growth in a choppy macro environment.”

Segment Performance
Among its major segments, Tommy Hilfiger’s revenue increased 4 percent compared to the prior year period (flat on a constant-currency basis). Tommy Hilfiger International’s revenue increased 3 percent (decreased 3 percent on a constant-currency basis). Tommy Hilfiger’s North America revenue increased 6 percent.

Calvin Klein revenue increased 6 percent compared to the prior year period (increased 3 percent on a constant-currency basis). Calvin Klein International’s revenue increased 10 percent (increased 6 percent on a constant-currency basis). Calvin Klein North America revenue decreased 1 percent driven by a decrease in the wholesale business.

Heritage Brands’ revenue decreased 11 percent compared to the prior year period. The Heritage Brands segment includes women’s intimate apparel principally under the Warner’s and True&Co. brands as well as men’s underwear under the Nike brand under a license.

In November, PVH closed on the sale of the Heritage Brands intimate apparel business to Basic Resources, Inc. Proceeds reached $150 million. PVH’s Heritage Brands business also includes men’s dress shirts and neckwear under the Van Heusen brand, as well as under various other licensed brand names.

Channel Performance
By channel, PVH’s direct-to-consumer revenue in the quarter increased 8 percent compared to the prior year period (increased 6 percent on a constant-currency basis), with growth in both the company’s owned and operated stores and digital commerce business in all regions.

Wholesale revenue increased 1 percent compared to the prior year period (decreased 3 percent on a constant-currency basis) as wholesale customers continue to take a cautious approach.

Total digital revenue increased 13 percent compared to the prior year period (increased 8 percent on a constant currency basis), with growth in both the company’s owned and operated digital commerce revenue and its wholesale sales to traditional retailers’ e-commerce businesses and pure players. Total digital penetration as a percentage of total revenue was approximately 20 percent.

Profit Performance
Gross margin was 56.7 percent compared to 55.9 percent in the prior year period. The increase reflects benefits from lower freight costs and a favorable shift in regional and channel mix, partially offset by higher product costs, including an approximately 100 basis point negative impact on inventory costs due to foreign currency exchange rates.

Earnings (loss) before interest and taxes (EBIT) on a GAAP basis was $230 million, inclusive of a $9 million positive impact due to foreign currency translation, compared to a loss of $214 million in the prior year period. Included in the third quarter of the prior year period were costs of $434 million, including a noncash goodwill impairment charge of $417 million. Included in the third quarter of 2023 were non-recurring costs of $19 million.

Adjusted EBIT on a non-GAAP basis was $249 million, inclusive of a $9 million positive impact due to foreign currency translation, compared to $220 million in the prior year period. The increase was driven by revenue growth and gross margin improvement. The company said it continues to take a disciplined approach to managing expenses, driving cost efficiencies while making targeted investments to drive its strategic initiatives.

Inventory decreased 19 percent compared to the prior year period, in line with expectations, as the company continues to proactively manage its inventory levels towards its previously announced goal of a 25 percent reduction in inventory as a percentage of sales.

Full-Year Outlook
Revenue is now projected to increase approximately 1 percent (an increase of 1 percent on a constant-currency basis) compared to previous guidance calling for an increase of 3 percent to 4 percent (an increase of 2 percent to 3 percent on a constant-currency basis) previously. The outlook includes the impact from the recently concluded sale of the Heritage Brands intimate apparel business.

On a GAAP basis, EPS is now expected to be approximately $9.75, up from guidance of approximately $9.60 previously. On a non-GAAP basis, EPS is expected to be increased to approximately $10.45 from approximately $10.35 previously.

Photo courtesy Tommy Hilfiger