PVH Corp. reported third-quarter revenue increased 10 percent to $2.33 billion compared to the prior-year period, despite worsening logistics disruptions in October, including significant U.S. port delays.

The revenue increase compared to the prior-year period reflects:

  • A 12 percent increase in the Tommy Hilfiger business compared to the prior-year period, including an 11 percent increase in Tommy Hilfiger International revenue and a 13 percent increase in Tommy Hilfiger North America revenue.
  • A 22 percent increase in the Calvin Klein business compared to the prior-year period, including a 19 percent increase in Calvin Klein International revenue and a 27 percent increase in Calvin Klein North America revenue.
  • A 36 percent decrease in the Heritage Brands business compared to the prior-year period, which included a 40 percent decline resulting from the Heritage Brands transaction and the exit from the Heritage Brands Retail business.
  • Total direct-to-consumer revenue for the third quarter was flat compared to the prior-year period, inclusive of a 5 percent reduction from the exit of the Heritage Brands Retail business.
  • Digital commerce increased 21 percent as compared to the prior-year period on top of exceptionally strong growth in 2020. Digital penetration as a percentage of total revenue was approximately 21 percent
  • The company’s retail stores continued to face pressure as a result of the pandemic, with the majority of its stores in Australia temporarily closed for most of the current year’s third quarter.
  • Total wholesale revenue for the third quarter increased 17 percent compared to the prior-year period despite the unplanned shift in the timing of U.S. wholesale shipments and the impact of the Heritage Brands transaction.
  • The company’s sales to the digital businesses of its traditional and pure-play wholesale customers continued to exhibit double-digit growth.
  • Revenue in its international businesses for the quarter exceeded third quarter 2019 pre-pandemic levels

Revenue in the current quarter reflected a 4 percent reduction resulting from the sale of certain intellectual property and other assets of the Heritage Brands business that closed on the first day of the third quarter of 2021 and the exit from the Heritage Brands retail business that was completed in the second quarter of 2021. The Heritage Brands business (Izod, Van Heusen, Arrow, and Geoffrey Beene) was sold to Authentic Brands Group.

Overall gross margin in the third quarter was 57.7 percent as compared to 52.0 percent in the prior-year period, primarily due to more full-price selling and a favorable shift in regional sales mix. These improvements more than offset higher freight costs, including an increase in air freight to mitigate anticipated supply chain and logistics delays.

Gross margin for the quarter increased over 300 basis points compared to third quarter 2019 pre-pandemic levels and drove operating margin expansion.

Earnings per share on a GAAP basis was $3.89 for the third quarter of 2021 compared to $0.98 in the prior-year period and ahead of guidance in the range of $3.00 to $3.05. Earnings per share on a non-GAAP basis was $2.67 for the third quarter of 2021 compared to $1.32 in the prior-year period and ahead of guidance of $1.95 to $2.00.

Non-GAAP exclusions included a pre-tax net gain of $113 million recorded in the current quarter in connection with the Heritage Brands transaction.

Overall inventory levels decreased 7 percent compared to the prior-year period, primarily due to the Heritage Brands transaction and the exit from the Heritage Brands Retail business. In-transit inventory levels in the third quarter increased over 50 percent compared to the prior-year period, primarily due to extended lead times from supply chain and logistics disruptions, including U.S. port delays, which drove the above-mentioned shift in the timing of U.S. wholesale shipments from the third quarter into the fourth quarter.

CEO comments
Stefan Larsson, chief executive officer, shown lead photo, commented, “Our third-quarter earnings significantly exceeded our guidance, led by our international businesses, and we achieved overall stronger than expected margin performance across brands. This reflects the strength of our global iconic brands, Calvin Klein and Tommy Hilfiger, and the pricing power we are able to achieve through strength in product, consumer engagement, and consumer experience in the digitally-led marketplace. While COVID-related challenges remain, we delivered double-digit revenue growth, which would have been even stronger, and above guidance, if not for the greater than anticipated impact of U.S. port delays that pushed wholesale shipments into the fourth quarter.”

Larsson added, “Looking ahead, while we continue to monitor the evolving COVID uncertainty, based on our strong third-quarter performance and current momentum with holiday sales off to a strong start, we are further raising our earnings guidance for the full year. We are now forecasting operating margins above 2019 pre-pandemic levels. We remain highly focused on driving sustainable, long-term profitable growth and shareholder value.”

Updated guidance

  • Full-year 2021 revenue is projected to increase 27 percent to 28 percent compared to 2020, reaffirming the top end of previous guidance;
  • GAAP basis: Raising to approximately $10.75 from approximately $8.80 previously; and
  • Non-GAAP basis: Raising to approximately $9.25 from approximately $8.50 previously.

Photo courtesy PVH Corp./Stefan Larsson, CEO