PVH Corp., the parent of the Tommy Hilfiger and Calvin Klein brands, reported that second-quarter revenue increased 4 percent year-over-year (YoY) to $2.21 billion, and grew 2 percent on a constant-currency basis, driven by growth in both the Tommy Hilfiger and Calvin Klein businesses.

  • Tommy Hilfiger revenue increased 6 percent YoY (+3 percent constant-currency in Q2.
    • Tommy Hilfiger International revenue increased 6 percent (+3 percent constant-currency).
    • Tommy Hilfiger North America revenue increased 4 percent.
  • Calvin Klein revenue increased 3 percent YoY (+2 percent constant-currency) in the quarter.
    • Calvin Klein International revenue increased 11 percent YoY(+9 percent constant-currency).
    • Calvin Klein North America revenue decreased 9 percent YoY in the quarter, primarily driven by a decrease in the wholesale business.
  • Heritage Brands’ revenue decreased 11 percent compared to the prior year period.

The increase for the quarter reportedly included “solid performance” in the company’s international businesses, particularly in the Asia Pacific region, including over 20 percent growth in local currency in China reflecting continued recovery after the lifting of COVID restrictions in the fourth quarter of 2022, and continued growth in Europe in euro terms. The increase also reflected continued growth in the North America direct-to-consumer business.

Direct-to-consumer revenue increased 11 percent (+10 percent constant-currency) compared to the prior-year period, with growth in both the company’s owned and operated stores and owned and operated digital commerce business in all regions.

Wholesale revenue decreased 3 percent (-6 percent constant-currency) compared to the prior-year period as wholesale customers reportedly continue to take a cautious approach.

Owned and operated digital commerce revenue increased 12 percent (+11 percent constant-currency) for the quarter, compared to the prior-year period. The strong growth in the company’s digital commerce business was said to be more than offset by a decrease in wholesale sales to traditional retailers’ e-commerce businesses and internet pure players, resulting in a 10 percent decrease (-12 percent constant-currency) in total digital revenue compared to the prior-year period. Total digital penetration as a percentage of total revenue was approximately 20 percent of sales.

Gross margin grew 40 basis points to 57.6 percent of sales in the second quarter, compared to 57.2 percent in the prior-year period. The increase reportedly reflects benefits from a favorable shift in regional and channel mix, lower freight costs, and price increases, partially offset by higher product costs, including an approximately 120 basis point negative impact on inventory costs due to foreign currency exchange rates.

Earnings before interest and taxes (EBIT) on a GAAP basis was $143 million in Q2, inclusive of a $5 million positive impact due to foreign currency translation, compared to $177 million in the prior-year period. EBIT on a GAAP basis included costs of $39 million in the reported quarter and net costs of $34 million in the prior-year period.

EBIT on a non-GAAP basis was $182 million, inclusive of a $5 million positive impact due to foreign currency translation, compared to $211 million in the prior-year period. The revenue increase was more than offset by the approximately 120 basis point negative impact on inventory costs due to foreign currency exchange rates, and overall higher expenses driven by a planned increase in investments to drive the company’s strategic initiatives, including an increase in marketing, compared to the prior-year period. 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.

On a GAAP basis PVH generated EPS of $1.50 a share in Q2, compared to $1.72 in the prior-year period. On a non-GAAP basis, EPS was $1.98 a share, compared to $2.08 in the prior year period.
EPS on both a GAAP and a non-GAAP basis for the second quarter of 2023 includes the positive impact of 5 cents per share related to foreign currency translation.

Inventory increased 6 percent at quarter-end compared to the prior-year period. The increase was said to bein line with projected sales growth and reflects a sequential improvement as compared to the 24 percent year-over-year increase in the first quarter of 2023.

Full-Year 2023 Guidance

  • Full-year revenue is projected to increase 3 percent to 4 percent as compared to 2022 (+2 percent to +3 percent constant-currency).
  • EPS on a GAAP basis is projected to be approximately $9.60 for the year, compared to $3.03 in 2022. EPS on a non-GAAP basis, which excludes restructuring charges, is projected to be approximately $10.35. EPS on a non-GAAP basis was $8.97 in 2022. The 2023 EPS projections on both a GAAP and a non-GAAP basis include the estimated positive impact of approximately 15 cents per share related to foreign currency translation.
  • Interest expense is projected to increase to approximately $100 million compared to $83 million in 2022 primarily due to higher interest rates.
  • Effective tax rate is projected to be approximately 22 percent.

Third-Quarter 2023 Guidance

  • Third-quarter revenue is projected to increase mid-single digits as compared to the third quarter of 2022 (+low-single digits constant-currency).
  • EPS on a GAAP basis is projected to be approximately $2.43 a share in Q3, compared to a loss of $2.88 a share in the prior year period. EPS on a non-GAAP basis, which excludes restructuring charges, is projected to be approximately $2.70. EPS on a non-GAAP basis was $2.60 in the prior year period. The third quarter 2023 EPS projections include the estimated positive impact of approximately 15 cents per share related to foreign currency translation.
  • Interest expense is projected to increase to approximately $25 million compared to $19 million in the third quarter of 2022 primarily due to higher interest rates.
  • Effective tax rate for Q3 is projected to be approximately 22 percent.

Photo courtesy Tommy Hilfiger