PVH Corp. reported revenue for the second quarter increased 13 percent (increased 11 percent on a constant currency basis) compared to the prior year period and exceeded guidance. Second quarter earnings per share of $2.12 exceeded guidance of $1.98 to $2.03. And second-quarter non-GAAP earnings per share of $2.18 exceeded guidance of $2.05 to $2.10.

Commenting on these results, Emanuel Chirico, chairman and chief executive officer, noted, “Our better-than-expected second quarter revenue and earnings reflected continued broad-based strength across our businesses and further underscored the momentum in our global designer lifestyle brands, Calvin Klein and Tommy Hilfiger, and the power of our diversified business model.”

Mr. Chirico continued, “We are increasingly evolving our business model and investing across our brands, our people and our platforms while finding innovative ways to engage consumers. We have made great progress in enhancing our consumer insights capabilities, increasing our efforts around online and offline consumer experiences, and driving engagement with the next generation of consumers. As we execute on our strategic priorities, we believe that we can continue to grow our global footprint while delivering a sustainable trajectory of long-term growth and stockholder value creation.”

Mr. Chirico concluded, “We are increasing our revenue and earnings guidance for the year, while continuing to take a prudent approach to planning our business in the second half of the years as we experience increasing macroeconomic and geopolitical volatility around the world.”

Second Quarter Business Review

Due to the 53rd week in 2017, second quarter 2018 comparable store sales are more appropriately compared with the thirteen week period ended August 6, 2017, instead of the period ended July 30, 2017. All comparable store sales are presented on this one week shifted basis.

Calvin Klein

Revenue in the Calvin Klein business for the quarter increased 18 percent to $925 million (increased 16 percent on a constant currency basis) compared to the prior year period. Calvin Klein International revenue increased 16 percent to $458 million (increased 13 percent on a constant currency basis) compared to the prior year period driven by strong performance in Europe and Asia including a 5 percent increase in comparable store sales. Calvin Klein North America revenue increased 19 percent to $467 million compared to the prior year period primarily as a result of strong wholesale performance and a 2 percent increase in comparable store sales.

Earnings before interest and taxes for the quarter increased to $105 million from $96 million in the prior year period. The earnings increase was primarily attributable to the revenue increase noted above, partially offset by the impact of aggressively clearing inventory in connection with the Fall 2018 global denim relaunch.

Tommy Hilfiger

Revenue in the Tommy Hilfiger business for the quarter increased 15 percent to $1.0 billion (increased 13 percent on a constant currency basis) compared to the prior year period. Tommy Hilfiger International revenue increased 20 percent to $592 million (increased 16 percent on a constant currency basis) compared to the prior-year period, driven by continued strong performance across all regions and channels, including an 11 percent increase in comparable store sales. Tommy Hilfiger North America revenue increased 9 percent to $437 million compared to the prior year period, principally attributable to continued strong performance in the wholesale business and a 5 percent increase in comparable store sales.

Earnings before interest and taxes on a GAAP basis for the quarter increased to $134 million from $91 million in the prior year period. Included in earnings before interest and taxes for the current quarter were costs of $7 million related to the April 2016 acquisition of the 55 percent interest in the company’s former Tommy Hilfiger joint venture in China (“TH China”) that it did not already own (the “TH China acquisition”), consisting of noncash amortization of short-lived assets. Included in earnings before interest and taxes for the prior year period were costs of (i) $7 million related to the TH China acquisition, primarily consisting of noncash amortization of short-lived assets, and (ii) $7 million in connection with the relocation of the Tommy Hilfiger office in New York, including noncash depreciation expense. Earnings before interest and taxes on a non-GAAP basis discussed below excludes these amounts.

Earnings before interest and taxes on a non-GAAP basis for the quarter increased to $141 million from $105 million in the prior-year period. The earnings increase was principally due to the revenue increase noted above as well as gross margin improvements, particularly in North America, and a leveraging of expenses.

Heritage Brands

Revenue in the Heritage Brands business for the quarter decreased 3 percent to $380 million compared to the prior year period. Comparable store sales increased 3 percent.

Earnings before interest and taxes for the quarter decreased to $33 millionfrom $35 million in the prior year period, driven by the decrease in revenue noted above.

Second Quarter Consolidated Results

Second quarter revenue increased 13 percent to $2.3 billion (increased 11 percent on a constant currency basis) compared to the prior year period.

Earnings per share on a GAAP basis were $2.12 for the second quarter of 2018 compared to $1.52 in the prior-year period.  Earnings per share on a non-GAAP basis for these periods, as discussed below, exclude these amounts.

Earnings per share on a non-GAAP basis were $2.18 for the second quarter of 2018 compared to $1.69 in the prior year period. Earnings per share on both a GAAP and non-GAAP basis for the second quarter of 2018 included a $0.03 positive impact related to foreign currency translation.

Earnings before interest and taxes on a GAAP basis for the quarter increased to $231 million from $181 million in the prior year period. Included in earnings before interest and taxes for the current quarter were costs of $7 million related to the TH China acquisition. Included in earnings before interest and taxes for the prior year period were $19 million of costs consisting of (i) $7 million related to the TH China acquisition, (ii) $7 million in connection with the relocation of the Tommy Hilfiger office in New York, including noncash depreciation expense and (iii) $6 million in connection with the consolidation within the company’s warehouse and distribution network in North America. Earnings before interest and taxes on a non-GAAP basis for these periods, as discussed below, exclude these amounts.

Earnings before interest and taxes on a non-GAAP basis for the quarter was $238 million compared to $200 million in the prior year period. The improvement in earnings was primarily driven by growth in the Tommy Hilfiger and Calvin Klein businesses.

Net interest expense of $29 million was relatively flat as compared to the prior year period. The effective tax rate on a GAAP basis was 18.6 percent as compared to 20.8 percent in the prior-year period. The effective tax rate on a non-GAAP basis was 18.8 percent as compared to 21.9 percent in the prior year period.

Six Months Consolidated Results

Revenue for the first six months of 2018 increased 15 percent to $4.6 billion (increased 11 percent on a constant currency basis) compared to the prior year period. The revenue increase was due to:

An 18 percent increase (14 percent increase on a constant currency basis) in the Calvin Klein business compared to the prior year period, driven by strong performance in Europe and Asia, as well as in the North Americawholesale business. International comparable store sales increased 7 percent. North America comparable store sales increased 4 percent.

An 18 percent increase (12 percent increase on a constant currency basis) in theTommy Hilfiger business compared to the prior year period, driven principally by continued strong performance across all regions and channels. Tommy Hilfiger International comparable store sales increased 10 percent. North America comparable store sales increased 7 percent.

A 1 percent increase in the Heritage Brands business occurred compared to the prior year period. Comparable store sales increased 2 percent.

Earnings per share on a GAAP basis were $4.42 for the first six months of 2018 compared to $2.41 in the prior-year period. Earnings per share on a non-GAAP basis for these periods, as discussed below, exclude these amounts.

Earnings per share on a non-GAAP basis were $4.55 for the first six months of 2018 compared to $3.34 in the prior-year period. Earnings per share on both a GAAP and non-GAAP basis for the first six months of 2018 included a $0.23 positive impact related to foreign currency translation.

Earnings before interest and taxes on a GAAP basis for the first six months of 2018 increased to $476 million, inclusive of a $21 million positive impact due to foreign currency translation, from $294 million in the prior year period. Included in earnings before interest and taxes for the first six months of 2018 were costs of $14 million related to the TH China acquisition.

Included in earnings before interest and taxes for the prior year period were $99 million of costs consisting of (i) $54 million in connection with the agreements to restructure the company’s supply chain relationship with Li & Fung Trading Limited (“Li & Fung”), under which the company terminated its non-exclusive buying agency agreement with Li & Fungduring 2017 (the “Li & Fung termination”), (ii) $14 million related to the TH China acquisition, (iii) $14 million in connection with the relocation of the Tommy Hilfiger office in New York, including noncash depreciation expense, (iv) $9 million in connection with the noncash settlement of certain of the company’s retirement plan benefit obligations and (v) $7 million in connection with the consolidation within the company’s warehouse and distribution network in North America. Earnings before interest and taxes on a non-GAAP basis for these periods, as discussed below, exclude these amounts.

Earnings before interest and taxes on a non-GAAP basis for the first six months of 2018 were $489 million, inclusive of a $21 million positive impact due to foreign currency translation compared to $392 million in the prior year period. The improvement in earnings was driven by strong growth across all businesses.

Net interest expense of $58 million for the first six months of 2018 was relatively flat as compared to the prior year period. The effective tax rate on a GAAP basis for the first six months of 2018 was 17.8 percent as compared to 19.5 percent in the prior year period. The effective tax rate on a non-GAAP basis for the first six months of 2018 was 18.0 percent as compared to 21.3 percent in the prior year period.

Inventory levels increased 16 percent as compared to the prior year period due to a shift in the timing of inventory receipts as a result of the 53rd week in 2017 and an expected increase in third quarter of 2018 sales as compared to the prior year period.

Stock Repurchase Program

During the first six months of 2018, the company repurchased approximately 900,000 shares of its common stock for $137 million (7.7 million shares for $829 million since inception) under the $1.250 billionstock repurchase program authorized by the board of directors through June 3, 2020. Stock repurchases under the program may be made from time to time over the period through open market purchases, accelerated share repurchase programs, privately negotiated transactions or other methods, as the company deems appropriate.

Purchases are made based on a variety of factors, such as price, corporate requirements and overall market conditions, applicable legal requirements and limitations, restrictions under the company’s debt arrangements, trading restrictions under the company’s insider trading policy and other relevant factors. The program may be modified by the board, including to increase or decrease the repurchase limitation or extend, suspend, or terminate the program, at any time, without prior notice.

2018 Outlook

The company’s effective tax rate projections for 2018 include estimates of the impacts of the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Legislation”) enacted on December 22, 2017, including (i) the reduction of the corporate income tax rate from 35 percent to 21 percent, (ii) the implementation of a modified territorial tax system, (iii) the introduction of a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations (known as “GILTI”) and (iv) the introduction of a base erosion anti-abuse tax measure (known as “BEAT”) that taxes certain payments between U.S. corporations and their subsidiaries. These projections are subject to adjustment in 2018, including as a result of changes in the provisional net tax benefit of $53 million recorded in the fourth quarter of 2017, during the measurement period allowed by the Securities and Exchange Commission as regulatory guidance needs to be issued in regard to the Tax Legislation and as the company completes its final analysis of the impacts of the Tax Legislation.

Full Year Guidance

Revenue in the second half of 2018 will be negatively impacted compared to the prior year period as a result of an additional week of revenue (a 53rd week) in 2017. The total negative impact in the second half of 2018 compared to the prior year period is approximately $150 million, comprised of (i) approximately $80 million due to the reduction of one week of revenue in the fourth quarter of 2018 as compared to the fourth quarter of 2017 and (ii) approximately $70 million that shifted into the first half of 2018 and out of the second half of 2018 as compared to the prior year periods due to the fiscal calendar misalignment in 2018 as compared to 2017.

In addition, the company continues to plan that the second half of 2018 will include an increase of approximately $15 million in marketing expenditures compared to the prior year period principally related to Calvin Klein. Marketing expenditures as a percentage of full-year revenue in 2018 remain consistent as compared to the prior year.

The company currently projects that 2018 earnings per share on a GAAP basis will be in a range of $8.96 to $9.01 compared to $6.84 in 2017. The company currently projects that 2018 earnings per share on a non-GAAP basis will be in a range of $9.20 to $9.25 compared to $7.94 in 2017. Both the GAAP and non-GAAP projections include the estimated positive impact of approximately $0.07 per share related to foreign currency translation, consisting of the positive impact of $0.23 in the first half of 2018, partially offset by an estimated negative impact of $0.16 in the second half of 2018.

Revenue in 2018 is projected to increase approximately 7 percent (increase approximately 6 percent on a constant currency basis) as compared to 2017. Revenue for the Calvin Klein business is projected to increase approximately 8 percent (also on a constant currency basis). Revenue for theTommy Hilfiger business is projected to increase approximately 9 percent (increase approximately 8 percent on a constant currency basis). Revenue for the Heritage Brands business is projected to increase approximately 1 percent.

Net interest expense in 2018 is projected to decrease to approximately$117 million from $122 million in 2017. The company estimates that the 2018 effective tax rate will be in a range of 13.5 percent to 14.5 percent which includes the estimated impact of the Tax Legislation.

The company’s estimate of 2018 earnings-per-share on a non-GAAP basis excludes approximately $25 million of pre-tax costs to be incurred related to the TH China acquisition, consisting of non-cash amortization of short-lived assets and the resulting estimated tax effect.

Third Quarter Guidance

The company currently projects that third quarter 2018 earnings per share on a GAAP basis will be in a range of $3.03 to $3.06 compared to $3.05 in the prior year period. The company projects that third quarter 2018 earnings per share on a non-GAAP basis will be in a range of $3.10 to $3.13 compared to $3.02 in the prior year period. Both the GAAP and non-GAAP projections include an estimated negative impact of approximately $0.09 per share related to foreign currency translation.

Revenue in the third quarter of 2018 is projected to increase approximately 7 percent (increase approximately 9 percent on a constant currency basis) compared to the prior year period. Revenue for the Calvin Klein business in the third quarter is projected to increase approximately 5 percent (increase approximately 7 percent on a constant currency basis). Revenue for the Tommy Hilfiger business in the third quarter is projected to increase approximately 10 percent (increase approximately 12 percent on a constant currency basis). Revenue for the Heritage Brands business in the third quarter is projected to increase approximately 8 percent.

Net interest expense in the third quarter of 2018 is projected to decrease to approximately $30 million compared to $31 million in the prior year period. The company estimates that the third quarter 2018 effective tax rate will be in a range of 4 percent to 5 percent.

The company’s estimate of third quarter 2018 earnings per share on a non-GAAP basis excludes approximately $7 million of pre-tax costs to be incurred related to the TH China acquisition, consisting of non-cash amortization of short-lived assets and the resulting estimated tax effect.