- Third quarter revenue increased 3% (increased 4% on a constant
currency basis) compared to the prior year period and exceeded
guidance
- Third quarter EPS exceeded guidance and was:
- GAAP basis: $2.82 compared to guidance of $2.70 to $2.75
- Non-GAAP basis: $3.10 compared to guidance of $2.95 to
$3.00
- EPS included a negative impact of $0.09 per share related to
foreign currency translation, in line with guidance
- Full year 2019 EPS outlook:
- GAAP basis: Raised to $8.04 to $8.06 from $7.95 to $8.05
previously
- Non-GAAP basis: Raised to $9.43 to $9.45 from $9.30 to $9.40
previously
- EPS outlook includes a negative impact of $0.35 per share
related to foreign currency translation, in line with previous
guidance
PVH Corp. [NYSE:PVH] reported its 2019 third quarter
results.
Non-GAAP Amounts: Amounts stated to be on a non-GAAP
basis exclude the items that are described below under the heading
“Non-GAAP Exclusions.” Amounts stated on a constant currency basis
are also deemed to be on a non-GAAP basis. Reconciliations of
amounts on a GAAP basis to amounts on a non-GAAP basis are
presented later in this release and identify and quantify all
excluded items.
CEO Comments: Commenting on these results, Emanuel
Chirico, Chairman and Chief Executive Officer, noted, “We are
pleased with our third quarter results, which exceeded our
expectations despite the difficult market environment. During the
quarter, we experienced continued outperformance by our European
businesses while experiencing volatility in our businesses in North
America and across China, including the impact of the ongoing
protests in Hong Kong.”
Mr. Chirico continued, “Looking ahead to the remainder of 2019,
we are raising our earnings guidance for the year, while continuing
to take a prudent approach to planning our business for the fourth
quarter. We believe the current holiday season will be very
competitive and highly promotional, and expect that the
macroeconomic and geopolitical volatility we are experiencing
globally will remain a headwind.”
Mr. Chirico concluded, “We have great confidence in our ability
to navigate this evolving consumer landscape and uncertain market
environment with the underlying power of CALVIN KLEIN and TOMMY
HILFIGER and our global diversified business model. We believe that
we are well positioned to capture the heart of the consumer by
executing our strategic priorities, while delivering sustainable
long term returns for our stockholders.”
Third Quarter Business Review: The Company’s third
quarter of 2019 results include the two acquisitions that closed in
the second quarter of 2019. The first was the Company’s acquisition
of the approximately 78% interest in Gazal Corporation Limited
(“Gazal”) that it did not already own (the “Australia
acquisition”). The Company and Gazal jointly owned and managed a
joint venture, PVH Brands Australia Pty. Limited (“PVH Australia”),
which licensed and operated businesses under the “TOMMY HILFIGER,”
“CALVIN KLEIN” and “Van Heusen” brands, along with other licensed
and owned brands. PVH Australia came under the Company’s full
control as a result of the Australia acquisition. The second was
the Company’s acquisition of the Tommy Hilfiger retail business in
Central and Southeast Asia from the Company’s previous licensee in
that market (the “TH CSAP acquisition”).
Tommy Hilfiger Revenue in the Tommy
Hilfiger business for the quarter increased 10% to $1.2 billion
(increased 12% on a constant currency basis) compared to the prior
year period. Tommy Hilfiger International revenue increased 16% to
$821 million (increased 20% on a constant currency basis) compared
to the prior year period, primarily driven by continued
outperformance in Europe and the addition of revenue resulting from
the Australia and TH CSAP acquisitions. International comparable
store sales increased 8%. Tommy Hilfiger North America revenue of
$423 million was flat compared to the prior year period, as growth
in the North America wholesale business was offset by a 5% decline
in North America comparable store sales due to continued weakness
in traffic and consumer spending trends, especially in stores
located in international tourist locations.
Earnings before interest and taxes on a GAAP basis for the
quarter of $177 million, inclusive of a $6 million negative impact
due to foreign currency translation, was flat compared to the prior
year period. Included in earnings before interest and taxes for the
current quarter were costs of $5 million related to the portion of
the Australia acquisition costs attributable to the Tommy Hilfiger
business and to the TH CSAP acquisition costs, primarily consisting
of noncash valuation adjustments. Included in earnings before
interest and taxes for the prior year period were costs of $6
million related to the April 2016 acquisition of the 55% interest
in the Company’s former Tommy Hilfiger joint venture in China that
it did not already own (the “TH China acquisition”), consisting of
noncash amortization of short-lived assets. 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 decreased to $182 million, inclusive of a $6 million
negative impact due to foreign currency translation, from $183
million in the prior year period. The slight decline in earnings
was principally due to gross margin pressure experienced in the
North America retail business, which more than offset the strong
revenue outperformance in Europe and the favorable impact of the
Australia acquisition.
Calvin Klein Revenue in the Calvin
Klein business for the quarter increased 1% to $969 million
(increased 3% on a constant currency basis) compared to the prior
year period. Calvin Klein International revenue increased 7% to
$514 million (increased 10% on a constant currency basis) compared
to the prior year period, driven by continued solid growth in
Europe and the addition of revenue resulting from the Australia
acquisition. These increases were partially offset by softness in
Asia due, in part, to the business disruptions caused by the
ongoing protests in Hong Kong and the trade tensions between the
U.S. and China. International comparable store sales decreased 2%.
Calvin Klein North America revenue decreased 5% to $455 million
compared to the prior year period, principally due to a decrease in
the wholesale business, including the effect of licensing the
Company’s directly operated women’s jeanswear wholesale business in
the U.S. and Canada to G-III Apparel Group, Ltd. (the “G-III
license”), and a 4% decline in North America comparable store sales
due to continued weakness in traffic and consumer spending trends,
especially in stores located in international tourist
locations.
Earnings before interest and taxes on a GAAP basis for the
quarter increased to $123 million, inclusive of a $2 million
negative impact due to foreign currency translation, from $121
million in the prior year period. Included in earnings before
interest and taxes for the current quarter were costs of (i) $3
million in connection with the restructuring associated with the
strategic changes for the Calvin Klein business announced in
January 2019 (the “Calvin Klein restructuring”), consisting of $2
million of contract termination and other costs and $1 million of
severance, and (ii) $2 million related to the portion of the
Australia acquisition costs attributable to the Calvin Klein
business, primarily consisting of noncash valuation adjustments.
Earnings before interest and taxes on a non-GAAP basis for the
period, as discussed below, excludes these amounts.
Earnings before interest and taxes on a non-GAAP basis for the
quarter increased to $129 million, inclusive of a $2 million
negative impact due to foreign currency translation, from $121
million on a GAAP basis in the prior year period (there were no
non-GAAP exclusions in the prior year period). The earnings
increase was principally due to gross margin improvements realized
in North America, partially offset by softness in Asia.
Heritage Brands Revenue in the
Heritage Brands business for the quarter decreased 13% to $375
million compared to the prior year period, primarily due to
weakness in the North America wholesale business and a 2% decline
in comparable store sales.
Earnings before interest and taxes for the quarter decreased to
$14 million from $24 million in the prior year period, principally
due to the revenue decline noted above.
Third Quarter Consolidated Results: Third quarter revenue
increased 3% to $2.6 billion (increased 4% on a constant currency
basis) compared to the prior year period.
Earnings per share on a GAAP basis was $2.82 for the third
quarter of 2019 compared to $3.15 in the prior year period. These
results include the amounts for the applicable period described
under the heading “Non-GAAP Exclusions” later in this release.
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 was $3.10 for the third
quarter of 2019 compared to $3.21 in the prior year period.
Earnings per share on both a GAAP and non-GAAP basis for the third
quarter of 2019 included a $0.09 negative impact related to foreign
currency translation.
Earnings before interest and taxes on a GAAP basis for the
quarter decreased to $270 million, inclusive of an $8 million
negative impact due to foreign currency translation, from $282
million in the prior year period. Included in earnings before
interest and taxes for the current quarter were $12 million of
costs consisting of (i) $9 million related to the Australia and TH
CSAP acquisitions and (ii) $3 million related to the Calvin Klein
restructuring. Included in earnings before interest and taxes for
the prior year period were costs of $6 million related to the TH
China acquisition. 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 decreased to $282 million, inclusive of an $8 million
negative impact due to foreign currency translation, compared to
$289 million in the prior year period. The decrease in earnings was
principally driven by the earnings decline in the Heritage Brands
business and a $4 million increase in corporate expenses, which
more than offset the earnings growth in the Calvin Klein
business.
Net interest expense on a GAAP basis decreased to $28 million
from $29 million in the prior year period. Included in net interest
expense for the current quarter was a $3 million expense resulting
from the remeasurement of the Company’s mandatorily redeemable
non-controlling interest that was recognized in connection with the
Australia acquisition. Net interest expense on a non-GAAP basis
excludes this amount. Net interest expense on a non-GAAP basis
decreased to $25 million from $29 million on a GAAP basis in the
prior year period (there were no non-GAAP exclusions in the prior
year period).
The effective tax rate on a GAAP basis was 13.6% as compared to
4.1% in the prior year period. The effective tax rate on a non-GAAP
basis was 10.6% as compared to 4.6% in the prior year period. The
increase in the current year period effective tax rate was due, in
part, to a lower overall benefit from discrete tax items as
compared to the prior year period.
Nine Months Consolidated Results: Revenue for the first
nine months of 2019 increased 2% to $7.3 billion (increased 5% on a
constant currency basis) compared to the prior year period. The
revenue increase was due to:
- A 7% increase (11% increase on a constant currency basis) in
the Tommy Hilfiger business compared to the prior year period,
driven principally by outperformance in Europe and the addition of
revenue resulting from the Australia acquisition. International
comparable store sales increased 9%. North America comparable store
sales decreased 6% due to continued weakness in traffic and
consumer spending trends, especially in stores located in
international tourist locations.
- A 2% decrease (1% increase on a constant currency basis) in the
Calvin Klein business compared to the prior year period, as
continued solid growth in Europe and the addition of revenue
resulting from the Australia acquisition were more than offset by
the negative impacts of (i) foreign currency translation, (ii)
softness experienced in Asia due, in part, to the business
disruptions caused by the ongoing protests in Hong Kong and the
trade tensions between the U.S. and China, (iii) the reduction of
revenue resulting from the closure of the CALVIN KLEIN 205 W39 NYC
brand (formerly Calvin Klein Collection) (the “CK Collection
closure”), and (iv) the effect of the G-III license. International
comparable store sales decreased 2%. North America comparable store
sales decreased 4% due to continued weakness in traffic and
consumer spending trends, especially in stores located in
international tourist locations.
- A 4% decrease in the Heritage Brands business compared to the
prior year period, primarily due to weakness in the North America
wholesale business and a 3% decline in comparable store sales.
Earnings per share on a GAAP basis was $6.46 for the first nine
months of 2019 compared to $7.56 in the prior year period. These
results include the amounts for the applicable period described
under the heading “Non-GAAP Exclusions” later in this release.
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 was $7.64 for the first
nine months of 2019 compared to $7.75 in the prior year period.
Earnings per share on both a GAAP and non-GAAP basis for the first
nine months of 2019 included a $0.30 negative impact related to
foreign currency translation.
Earnings before interest and taxes on a GAAP basis for the first
nine months of 2019 decreased to $654 million, inclusive of a $27
million negative impact due to foreign currency translation, from
$758 million in the prior year period. These results include the
amounts for the applicable period described under the heading
“Non-GAAP Exclusions” later in this release. 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 nine months of 2019 increased to $781 million, inclusive of a
$27 million negative impact due to foreign currency translation,
from $778 million in the prior year period. The improvement in
earnings was driven by earnings growth in the Tommy Hilfiger and
Calvin Klein businesses, partially offset by an earnings decline in
the Heritage Brands business and a $9 million increase in corporate
expenses.
Net interest expense on a GAAP basis for the first nine months
of 2019 decreased to $85 million from $87 million in the prior year
period. Included in net interest expense for the current period was
a $3 million expense resulting from the remeasurement of the
Company’s mandatorily redeemable non-controlling interest that was
recognized in connection with the Australia acquisition. Net
interest expense on a non-GAAP basis excludes this amount. Net
interest expense on a non-GAAP basis for the first nine months of
2019 decreased to $82 million from $87 million on a GAAP basis in
the prior year period (there were no non-GAAP exclusions in the
prior year period).
The effective tax rate on a GAAP basis for the first nine months
of 2019 was 15.1% as compared to 12.7% in the prior year period.
The effective tax rate on a non-GAAP basis for the first nine
months of 2019 was 18.1% as compared to 13.0% in the prior year
period.
Inventory levels increased 5% as compared to the prior year
period due to inventory acquired as part of the Australia and TH
CSAP acquisitions.
Stock Repurchase Program: During the first nine months of
2019, the Company repurchased approximately 2.4 million shares of
its common stock for $223 million (11.4 million shares for $1.2
billion since inception) under the $2.0 billion stock repurchase
program authorized by the Board of Directors through June 3, 2023.
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.
2019 Outlook: The Company’s 2019 guidance incorporates
the impact on certain of the Company’s products of tariffs imposed
and expected to be imposed by the U.S. on goods imported from China
into the U.S., including (i) $250 billion of total goods imported
from China into the U.S. (Tranches 1, 2 and 3) currently at 25% and
(ii) $300 billion of total goods imported from China into the U.S.
(Tranche 4) at 15% imposed on certain goods in September 2019 and
expected to be imposed on certain other goods in December 2019.
These tariffs are expected to have a negative impact of
approximately $0.20 per share in 2019.
Please see the section entitled “Full Year and Quarterly
Reconciliations of GAAP to Non-GAAP Amounts” at the end of this
release for further detail and reconciliations of GAAP to non-GAAP
amounts discussed in this section.
Full Year Guidance The Company
currently projects that 2019 earnings per share on a GAAP basis
will be in a range of $8.04 to $8.06 compared to $9.65 in 2018. The
Company currently projects that 2019 earnings per share on a
non-GAAP basis will be in a range of $9.43 to $9.45 compared to
$9.60 in 2018. Both the GAAP and non-GAAP projections include the
estimated negative impact of approximately $0.35 per share related
to foreign currency translation.
Revenue in 2019 is projected to increase approximately 1%
(increase approximately 4% on a constant currency basis) as
compared to 2018. Revenue for the Tommy Hilfiger business is
projected to increase approximately 6% (increase approximately 9%
on a constant currency basis). Revenue for the Calvin Klein
business is projected to decrease approximately 2% (to be flat on a
constant currency basis). Revenue for the Heritage Brands business
is projected to decrease approximately 3%.
Net interest expense in 2019 on a GAAP basis is projected to
decrease to approximately $114 million compared to $116 million in
2018. The Company’s estimate of 2019 net interest expense includes
a $7 million expense expected to result from the remeasurements of
the Company’s mandatorily redeemable non-controlling interest that
was recognized in connection with the Australia acquisition. Net
interest expense on a non-GAAP basis excludes this amount. Net
interest expense in 2019 on a non-GAAP basis is projected to
decrease to approximately $107 million compared to $116 million on
a GAAP basis in 2018 (there were no non-GAAP exclusions in the
prior year). The Company estimates that the 2019 effective tax rate
will be in a range of 11.5% to 12.0% on a GAAP basis and in a range
of 14.0% to 14.5% on a non-GAAP basis.
The Company’s estimate of 2019 earnings per share on a non-GAAP
basis excludes approximately $142 million of pre-tax net costs,
consisting of (i) $105 million of pre-tax costs expected to be
incurred in connection with the Calvin Klein restructuring,
consisting of a noncash lease asset impairment resulting from the
closure of the Company’s flagship store on Madison Avenue in New
York, New York, severance, contract termination and other costs,
other noncash asset impairments, and inventory markdowns, (ii) $60
million of pre-tax costs incurred in connection with the agreements
to terminate early the licenses for the global Calvin Klein and
Tommy Hilfiger North America socks and hosiery businesses (the
“Socks and Hosiery transaction”) in conjunction with the Company’s
plan to consolidate the socks and hosiery business for all Company
brands in North America in a newly formed joint venture, which is
expected to begin operations in December 2019, and to bring
in-house the international Calvin Klein socks and hosiery wholesale
businesses, (iii) $55 million of pre-tax costs incurred in
connection with the closure of the Company’s TOMMY HILFIGER
flagship and anchor stores in the United States (the “TH U.S. store
closures”), primarily consisting of noncash lease asset
impairments, (iv) $6 million of pre-tax costs incurred in
connection with the refinancing of the Company’s senior credit
facilities, (v) a pre-tax non-cash gain of $113 million recorded to
write up the Company's equity investments in Gazal and PVH
Australia to fair value in connection with the Australia
acquisition, (vi) $22 million of pre-tax costs expected to be
incurred in connection with the Australia and TH CSAP acquisitions,
primarily consisting of noncash valuation adjustments, and (vii)
the $7 million pre-tax expense expected to be recorded in net
interest expense resulting from the remeasurements of the Company’s
mandatorily redeemable non-controlling interest that was recognized
in connection with the Australia acquisition, and the resulting
estimated tax effects of these pre-tax items.
Fourth Quarter Guidance The Company
currently projects that fourth quarter 2019 earnings per share on a
GAAP basis will be in a range of $1.56 to $1.58 compared to $2.09
in the prior year period. The Company currently projects that
fourth quarter 2019 earnings per share on a non-GAAP basis will be
in a range of $1.77 to $1.79 compared to $1.84 in the prior year
period. Both the GAAP and non-GAAP projections include an estimated
negative impact of approximately $0.05 per share related to foreign
currency translation.
Revenue in the fourth quarter of 2019 is projected to be flat
(increase approximately 2% on a constant currency basis) compared
to the prior year period. Revenue for the Tommy Hilfiger business
in the fourth quarter is projected to increase approximately 4%
(increase approximately 6% on a constant currency basis). Revenue
for the Calvin Klein business in the fourth quarter is projected to
decrease approximately 5% (decrease approximately 3% on a constant
currency basis). Revenue for the Heritage Brands business in the
fourth quarter is projected to increase 1%.
Net interest expense in the fourth quarter of 2019 on a GAAP
basis is projected to be flat compared to $29 million in the prior
year period. The Company’s estimate of net interest expense
includes a $4 million expense expected to result from the
remeasurement of the Company’s mandatorily redeemable
non-controlling interest that was recognized in connection with the
Australia acquisition. Net interest expense on a non-GAAP basis
excludes this amount. Net interest expense in the fourth quarter of
2019 on a non-GAAP basis is projected to decrease to approximately
$25 million compared to $29 million on a GAAP basis in the prior
year period (there were no non-GAAP exclusions in the prior year
period). The Company estimates that the fourth quarter 2019
effective tax rate will be in a range of (4.0)% to (8.0)% on a GAAP
basis and in a range of (5.5)% to (9.5)% on a non-GAAP basis.
Included in the fourth quarter 2019 effective tax rate guidance is
the expected favorable settlement of a multi-year audit from an
international jurisdiction.
The Company’s estimate of fourth quarter 2019 earnings per share
on a non-GAAP basis excludes approximately $13 million of pre-tax
costs, consisting of (i) $6 million of pre-tax costs expected to be
incurred in connection with the Australia and TH CSAP acquisitions,
primarily consisting of noncash valuation adjustments, (ii) the $4
million pre-tax expense expected to be recorded in net interest
expense resulting from the remeasurement of the Company’s
mandatorily redeemable non-controlling interest that was recognized
in connection with the Australia acquisition and (iii) $2 million
of pre-tax costs expected to be incurred in connection with the
Calvin Klein restructuring, and the resulting estimated tax effects
of these pre-tax costs.
Non-GAAP Exclusions: The discussions in this release that
refer to non-GAAP amounts exclude the following:
- Pre-tax costs of approximately $105 million incurred and
expected to be incurred in 2019 related to the Calvin Klein
restructuring, consisting of a noncash lease asset impairment
resulting from the closure of the Company’s flagship store on
Madison Avenue in New York, New York, other noncash asset
impairments, severance, contract termination and other costs, and
inventory markdowns, of which $70 million was incurred in the first
quarter, $29 million was incurred in the second quarter, $3 million
was incurred in the third quarter and approximately $2 million is
expected to be incurred in the fourth quarter.
- Pre-tax costs of $55 million incurred in the first quarter of
2019 in connection with the TH U.S. store closures, primarily
consisting of noncash lease asset impairments.
- Pre-tax costs of $60 million incurred in the second quarter of
2019 in connection with the Socks and Hosiery transaction.
- Pre-tax costs of $6 million incurred in the first quarter of
2019 in connection with the refinancing of the Company’s senior
credit facilities.
- Pre-tax noncash gain of $113 million recorded in the second
quarter of 2019 to write up the Company's equity investments in
Gazal and PVH Australia to fair value in connection with the
Australia acquisition.
- Pre-tax costs of approximately $22 million incurred and
expected to be incurred in 2019 in connection with the Australia
and TH CSAP acquisitions, primarily consisting of noncash valuation
adjustments, of which $7 million was incurred in the second
quarter, $9 million was incurred in the third quarter and
approximately $6 million is expected to be incurred in the fourth
quarter.
- Pre-tax expenses of approximately $7 million incurred and
expected to be incurred in 2019 resulting from the remeasurements
of the Company’s mandatorily redeemable non-controlling interest,
which was recognized in connection with the Australia acquisition,
of which $3 million was recognized in the third quarter and
approximately $4 million is expected to be recognized in the fourth
quarter.
- Pre-tax costs of $41 million incurred in the fourth quarter of
2018 related to the Calvin Klein restructuring, consisting of $27
million of severance, $7 million of noncash asset impairments, $4
million of contract termination and other costs, and $2 million of
inventory markdowns.
- Pre-tax costs of $24 million incurred in 2018 related to the TH
China acquisition, consisting of noncash amortization of
short-lived assets, of which $7 million was incurred in the first
quarter, $7 million was incurred in the second quarter, $6 million
was incurred in the third quarter and $4 million was incurred in
the fourth quarter.
- Pre-tax loss of $15 million recorded in the fourth quarter of
2018 related to the recognized actuarial loss on retirement
plans.
- Discrete tax benefit of $41 million recorded in the fourth
quarter of 2018 related to the remeasurement of certain of the
Company’s net deferred tax liabilities in connection with the
enactment of legislation in the Netherlands known as the “2019
Dutch Tax Plan.”
- Discrete net tax benefit of $25 million recorded in the fourth
quarter of 2018 to adjust the provisional net tax benefit recorded
in 2017 in connection with the U.S. Tax Cuts and Jobs Act of 2017,
primarily consisting of the release of a valuation allowance on the
Company’s foreign tax credits.
- Estimated tax effects associated with the above pre-tax items,
which are based on the Company’s assessment of deductibility. In
making this assessment, the Company evaluated each item that it had
identified above as a non-GAAP exclusion to determine if such item
is taxable or tax deductible, and if so, in what jurisdiction the
tax expense or tax deduction would occur. All items above were
identified as either primarily taxable or tax deductible, with the
tax effect taken at the applicable income tax rate in the local
jurisdiction, or as non-taxable or non-deductible, in which case
the Company assumed no tax effect.
As a supplement to the Company’s GAAP results, the Company
presents constant currency revenue information, which is a non-GAAP
financial measure. The Company presents results in this manner
because it is a global company that transacts business in multiple
currencies but reports financial information in U.S. dollars.
Foreign currency exchange rate fluctuations affect the amounts
reported by the Company in U.S. dollars with respect to its foreign
revenues. Exchange rate fluctuations can have a significant effect
on reported revenues. The Company believes presenting constant
currency revenue information provides useful information to
investors, as it provides information to assess how its businesses
performed excluding the effects of changes in foreign currency
exchange rates and assists investors in evaluating the
effectiveness of the Company’s operations and underlying business
trends in a manner that is consistent with management’s evaluation
of business performance.
The Company calculates constant currency revenue information by
translating its foreign revenues for the current year period into
U.S. dollars at the average exchange rates in effect during the
comparable prior year period (rather than at the actual exchange
rates in effect during the current year period).
Constant currency performance should be viewed in addition to,
and not in lieu of or as superior to, the Company’s operating
performance calculated in accordance with GAAP. The constant
currency revenue information presented may not be comparable to
similarly described measures reported by other companies.
Please see Tables 1 through 10 and the sections entitled
“Reconciliations of 2019 Constant Currency Revenue” and “Full Year
and Quarterly Reconciliations of GAAP to Non-GAAP Amounts” later in
this release for reconciliations of GAAP to non-GAAP amounts.
The Company webcasts its conference calls to review its earnings
releases. The Company’s conference call to review its third
quarter earnings release is scheduled for Tuesday, November 26,
2019 at 9:00 a.m. EST. Please log on to the Company’s web site
at www.PVH.com and go to the Events page included in the
Investors section to listen to the live webcast of the conference
call. The webcast will be available for replay for one year after
it is held, commencing approximately two hours after the live
broadcast ends. Please log on to www.PVH.com as described above to
listen to the replay. In addition, an audio replay of the
conference call is available for 48 hours starting approximately
two hours after it is held. The replay of the conference call can
be accessed by calling (domestic) 888-203-1112 and (international)
719-457-0820 and using passcode 1072389. The conference call and
webcast consist of copyrighted material. They may not be
re-recorded, reproduced, re-transmitted, rebroadcast or otherwise
used without the Company’s express written permission. Your
participation represents your consent to these terms and
conditions, which are governed by New York law.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: Forward-looking statements in this press
release and made during the conference call/webcast, including,
without limitation, statements relating to the Company’s future
revenue and earnings, plans, strategies, objectives, expectations
and intentions are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. Investors are
cautioned that such forward-looking statements are inherently
subject to risks and uncertainties, many of which cannot be
predicted with accuracy and some of which might not be anticipated,
including, without limitation, (i) the Company’s plans, strategies,
objectives, expectations and intentions are subject to change at
any time at the discretion of the Company; (ii) the Company may be
considered to be highly leveraged and uses a significant portion of
its cash flows to service its indebtedness, as a result of which
the Company might not have sufficient funds to operate its
businesses in the manner it intends or has operated in the past;
(iii) the levels of sales of the Company’s apparel, footwear and
related products, both to its wholesale customers and in its retail
stores, the levels of sales of the Company’s licensees at wholesale
and retail, and the extent of discounts and promotional pricing in
which the Company and its licensees and other business partners are
required to engage, all of which can be affected by weather
conditions, changes in the economy, fuel prices, reductions in
travel, fashion trends, consolidations, repositionings and
bankruptcies in the retail industries, repositionings of brands by
the Company’s licensors, and other factors; (iv) the Company’s
ability to manage its growth and inventory, including the Company’s
ability to realize benefits from acquisitions, such as the
acquisitions referenced in this press release; (v) quota
restrictions, the imposition of safeguard controls and the
imposition of duties or tariffs on goods from the countries where
the Company or its licensees produce goods under its trademarks,
such as the recently imposed tariffs and threatened increased
tariffs on goods imported into the U.S. from China, any of which,
among other things, could limit the ability to produce products in
cost-effective countries or in countries that have the labor and
technical expertise needed, or require the Company to absorb costs
or try to pass costs onto consumers, which could materially impact
the Company’s revenue and profitability; (vi) the availability and
cost of raw materials; (vii) the Company’s ability to adjust timely
to changes in trade regulations and the migration and development
of manufacturers (which can affect where the Company’s products can
best be produced); (viii) changes in available factory and shipping
capacity, wage and shipping cost escalation, civil conflict, war or
terrorist acts, the threat of any of the foregoing, or political or
labor instability in any of the countries where the Company’s or
its licensees’ or other business partners’ products are sold,
produced or are planned to be sold or produced; (ix) disease
epidemics and health related concerns, which could result in closed
factories, reduced workforces, scarcity of raw materials and
scrutiny or embargoing of goods produced in infected areas, as well
as reduced consumer traffic and purchasing, as consumers become ill
or limit or cease shopping in order to avoid exposure; (x)
acquisitions and divestitures and issues arising with acquisitions,
divestitures and proposed transactions, including, without
limitation, the ability to integrate an acquired entity or business
into the Company with no substantial adverse effect on the acquired
entity’s, the acquired business’s or the Company’s existing
operations, employee relationships, vendor relationships, customer
relationships or financial performance, and the ability to operate
effectively and profitably the Company’s continuing businesses
after the sale or other disposal of a subsidiary, business or the
assets thereof; (xi) the failure of the Company’s licensees to
market successfully licensed products or to preserve the value of
the Company’s brands, or their misuse of the Company’s brands;
(xii) significant fluctuations of the U.S. dollar against foreign
currencies in which the Company transacts significant levels of
business; (xiii) the Company’s retirement plan expenses recorded
throughout the year are calculated using actuarial valuations that
incorporate assumptions and estimates about financial market,
economic and demographic conditions, and differences between
estimated and actual results give rise to gains and losses, which
can be significant, that are recorded immediately in earnings,
generally in the fourth quarter of the year; (xiv) the impact of
new and revised tax legislation and regulations, particularly the
U.S. Tax Cuts and Jobs Act of 2017 that might disproportionately
affect the Company as compared to some of its peers due to the
specific tax structure of the Company and its greater percentage of
revenues and income generated outside of the U.S., and the
legislation enacted in the Netherlands known as the “2019 Dutch Tax
Plan”; and (xv) other risks and uncertainties indicated from time
to time in the Company’s filings with the Securities and Exchange
Commission (“SEC”).
This press release includes, and the conference call/webcast
will include, certain non-GAAP financial measures, as defined under
SEC rules. Reconciliations of these measures are included in the
financial information later in this release, as well as in the
Company’s Current Report on Form 8-K furnished to the SEC in
connection with this earnings release, which is available on the
Company’s website at www.PVH.com and on the SEC’s website at
www.sec.gov.
The Company does not undertake any obligation to update publicly
any forward-looking statement, including, without limitation, any
estimate regarding revenue or earnings, whether as a result of the
receipt of new information, future events or otherwise.
PVH CORP.
Consolidated GAAP Income
Statements
(In millions, except per share
data)
Quarter Ended
Nine Months Ended
11/3/19
11/4/18
11/3/19
11/4/18
Net sales
$
2,433.5
$
2,377.4
$
6,919.8
$
6,794.1
Royalty revenue
113.1
112.2
288.3
283.1
Advertising and other revenue
41.1
34.9
100.1
95.6
Total revenue
$
2,587.7
$
2,524.5
$
7,308.2
$
7,172.8
Gross profit on net sales
$
1,252.0
$
1,217.7
$
3,602.1
$
3,574.1
Gross profit on royalty, advertising and
other revenue
154.2
147.1
388.4
378.7
Total gross profit
1,406.2
1,364.8
3,990.5
3,952.8
Selling, general and administrative
expenses
1,141.6
1,091.3
3,457.6
3,215.8
Non-service related pension and
postretirement income
2.0
2.7
6.1
7.8
Debt modification and extinguishment
costs
5.2
Other noncash gain
113.1
Equity in net income of unconsolidated
affiliates
2.9
6.1
7.5
13.2
Earnings before interest and taxes
269.5
282.3
654.4
758.0
Interest expense, net
27.8
29.4
84.7
86.9
Pre-tax income
241.7
252.9
569.7
671.1
Income tax expense
32.8
10.3
86.1
84.9
Net income
208.9
242.6
483.6
586.2
Less: Net loss attributable to redeemable
non-controlling interest (1)
(0.3
)
(0.5
)
(1.1
)
(1.5
)
Net income attributable to PVH Corp.
$
209.2
$
243.1
$
484.7
$
587.7
Diluted net income per common share
attributable to PVH Corp. (2)
$
2.82
$
3.15
$
6.46
$
7.56
Quarter Ended
Nine Months Ended
11/3/19
11/4/18
11/3/19
11/4/18
Depreciation and amortization expense
$
81.6
$
81.8
$
236.5
$
248.0
Please see following pages for information related to non-GAAP
measures discussed in this release.
(1)
The Company and Arvind Limited have a
joint venture in Ethiopia in which the Company owns a 75%
interest.
(2)
Please see Note A in Notes to Consolidated
GAAP Income Statements for the reconciliations of GAAP diluted net
income per common share to diluted net income per common share on a
non-GAAP basis.
PVH CORP. Non-GAAP Measures
The Company believes it is useful to investors to present its
results for the periods ended November 3, 2019 and November 4, 2018
on a non-GAAP basis by excluding (i) the costs incurred in the
first, second and third quarters of 2019 related to the
restructuring associated with the strategic changes for its Calvin
Klein business announced in January 2019 (the “Calvin Klein
restructuring”), consisting of a noncash lease asset impairment
resulting from the closure of the Company’s flagship store on
Madison Avenue in New York, New York; other noncash asset
impairments; severance; contract termination and other costs; and
inventory markdowns; (ii) the costs incurred in the first quarter
of 2019 in connection with the closure of the Company’s TOMMY
HILFIGER flagship and anchor stores in the United States (the “TH
U.S. store closures”), primarily consisting of noncash lease asset
impairments; (iii) the costs incurred in the first quarter of 2019
in connection with the refinancing of the Company’s senior credit
facilities; (iv) the costs incurred in the second and third
quarters of 2019 in connection with the acquisition of the
approximately 78% interest in Gazal Corporation Limited (“Gazal”)
that the Company did not already own (the “Australia acquisition”)
and the acquisition of the Tommy Hilfiger retail business in
Central and Southeast Asia from the Company’s previous licensee in
that market (the “TH CSAP acquisition”), primarily consisting of
noncash valuation adjustments; (v) the noncash gain recorded in the
second quarter of 2019 to write up the Company’s equity investments
in Gazal and PVH Brands Australia Pty. Limited (“PVH Australia”) to
fair value in connection with the Australia acquisition; (vi) the
one-time costs recorded in the second quarter of 2019 on the
Company’s equity investments in Gazal and PVH Australia prior to
the Australia acquisition closing; (vii) the costs incurred in the
second quarter of 2019 in connection with the agreements to
terminate early the licenses for the global Calvin Klein and Tommy
Hilfiger North America socks and hosiery businesses (the “Socks and
Hosiery transaction”) in conjunction with the Company’s plan to
consolidate the socks and hosiery business for all Company brands
in North America in a newly formed joint venture, which is expected
to begin operations in December 2019, and to bring in-house the
international Calvin Klein socks and hosiery wholesale businesses;
(viii) the expense recorded in the third quarter of 2019 resulting
from the remeasurement of the Company’s mandatorily redeemable
non-controlling interest that was recognized in connection with the
Australia acquisition; (ix) the costs incurred in the first, second
and third quarters of 2018 related to the acquisition of the 55%
interest in TH Asia, Ltd., its former joint venture for TOMMY
HILFIGER in China, that it did not already own (the “TH China
acquisition”), consisting of noncash amortization of short-lived
assets; and (x) the tax effects associated with the foregoing
pre-tax items. The Company excludes these amounts because it deems
them to be non-recurring or non-operational and believes that their
exclusion (i) facilitates comparing current results against past
and future results by eliminating amounts that it believes are not
comparable between periods, thereby permitting management to
evaluate performance and investors to make decisions based on the
ongoing operations of the Company, and (ii) assists investors in
evaluating the effectiveness of the Company’s operations and
underlying business trends in a manner that is consistent with
management’s evaluation of business performance. The Company
believes that investors often look at ongoing operations of an
enterprise as a measure of assessing performance. The Company uses
its results excluding these amounts to evaluate its operating
performance and to discuss its business with investment
institutions, the Company’s Board of Directors and others. The
Company’s results excluding the items described above are also the
basis for certain incentive compensation calculations. The non-GAAP
measures should be viewed in addition to, and not in lieu of or
superior to, the Company’s operating performance measures
calculated in accordance with GAAP. The information presented on a
non-GAAP basis may not be comparable to similarly titled measures
reported by other companies.
PVH CORP. Non-GAAP Measures (continued) (In millions, except
per share data)
The following table presents the non-GAAP measures that are
discussed in this release. Please see Tables 1 through 10 for the
reconciliations of the GAAP amounts to amounts on a non-GAAP
basis.
Quarter Ended
Nine Months Ended
11/3/19
11/4/18
11/3/19
11/4/18
Non-GAAP Measures
Total gross profit (1)
$
1,412.7
$
4,014.0
Selling, general and administrative
expenses (2)
1,136.0
$
1,085.0
3,249.1
$
3,195.9
Debt modification and extinguishment costs
(3)
—
Other noncash gain (4)
—
Equity in net income of unconsolidated
affiliates (5)
9.6
Earnings before interest and taxes (6)
281.6
288.6
780.6
777.9
Interest expense, net(7)
25.2
82.1
Income tax expense (8)
27.2
11.9
126.1
89.8
Net income attributable to PVH Corp.
(9)
229.5
247.8
573.5
602.7
Diluted net income per common share
attributable to PVH Corp. (10)
$
3.10
$
3.21
$
7.64
$
7.75
Depreciation and amortization expense
(11)
$
75.5
$
228.1
(1)
Please see Table 3 for the reconciliations
of GAAP gross profit to gross profit on a non-GAAP basis.
(2)
Please see Table 4 for the reconciliations
of GAAP selling, general and administrative (“SG&A”) expenses
to SG&A expenses on a non-GAAP basis.
(3)
Please see Table 5 for the reconciliation
of GAAP debt modification and extinguishment costs to debt
modification and extinguishment costs on a non-GAAP basis.
(4)
Please see Table 6 for the reconciliation
of GAAP other noncash gain to other noncash gain on a non-GAAP
basis.
(5)
Please see Table 7 for the reconciliation
of GAAP equity in net income of unconsolidated affiliates to equity
in net income of unconsolidated affiliates on a non-GAAP basis.
(6)
Please see Table 2 for the reconciliations
of GAAP earnings before interest and taxes to earnings before
interest and taxes on a non-GAAP basis.
(7)
Please see Table 8 for the reconciliations
of GAAP interest expense, net to interest expense, net on a
non-GAAP basis.
(8)
Please see Table 9 for the reconciliations
of GAAP income tax expense to income tax expense on a non-GAAP
basis and an explanation of the calculation of the tax effects
associated with the pre-tax items identified as non-GAAP
exclusions.
(9)
Please see Table 1 for the reconciliations
of GAAP net income to net income on a non-GAAP basis.
(10)
Please see Note A in Notes to Consolidated
GAAP Income Statements for the reconciliations of GAAP diluted net
income per common share to diluted net income per common share on a
non-GAAP basis.
(11)
Please see Table 10 for the
reconciliations of GAAP depreciation and amortization expense to
depreciation and amortization expense on a non-GAAP basis.
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts
(In millions, except per share
data)
Table 1 -
Reconciliations of GAAP net income to net income on a non-GAAP
basis
Quarter Ended
Nine Months Ended
11/3/19
11/4/18
11/3/19
11/4/18
Net income attributable to PVH Corp.
$
209.2
$
243.1
$
484.7
$
587.7
Diluted net income per common share
attributable to PVH Corp.(1)
$
2.82
$
3.15
$
6.46
$
7.56
Pre-tax items excluded:
Gross profit charges associated with the
Calvin Klein restructuring (inventory markdowns)
12.9
Gross profit charges associated with the
Australia and TH CSAP acquisitions (short-lived noncash inventory
valuation adjustments)
6.5
10.6
SG&A expenses associated with the
Calvin Klein restructuring
3.5
90.0
SG&A expenses associated with the
Socks and Hosiery transaction
59.8
SG&A expenses associated with the TH
U.S. store closures
54.9
SG&A expenses associated with the
Australia and TH CSAP acquisitions
2.1
2.8
SG&A expenses associated with the
refinancing of the Company’s senior credit facilities
1.0
SG&A expenses associated with the TH
China acquisition
6.3
19.9
Debt modification and extinguishment
costs
5.2
Noncash gain to write up the Company’s
equity investments in Gazal and PVH Australia to fair value
(recorded in other noncash gain)
(113.1
)
One-time expenses recorded on the
Company’s equity investments in Gazal and PVH Australia (recorded
in equity in net income of unconsolidated affiliates)
2.1
Expense resulting from the remeasurement
of the mandatorily redeemable non-controlling interest in
connection with the Australia acquisition (recorded in interest
expense, net)
2.6
2.6
Tax effects of the above pre-tax
items(2)
5.6
(1.6
)
(40.0
)
(4.9
)
Net income on a non-GAAP basis
attributable to PVH Corp.
$
229.5
$
247.8
$
573.5
$
602.7
Diluted net income per common share on a
non-GAAP basis attributable to PVH Corp.(1)
$
3.10
$
3.21
$
7.64
$
7.75
(1)
Please see Note A in Notes to the
Consolidated GAAP Income Statements for the reconciliations of GAAP
diluted net income per common share to diluted net income per
common share on a non-GAAP basis.
(2)
Please see Table 9 for an explanation of
the calculation of the tax effects of the above items.
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 2 -
Reconciliations of GAAP earnings before interest and taxes to
earnings before interest and taxes on a non-GAAP basis
Quarter Ended
Nine Months Ended
11/3/19
11/4/18
11/3/19
11/4/18
Earnings before interest and taxes
$
269.5
$
282.3
$
654.4
$
758.0
Items excluded:
Gross profit charges associated with the
Calvin Klein restructuring (inventory markdowns)
12.9
Gross profit charges associated with the
Australia and TH CSAP acquisitions (short-lived noncash inventory
valuation adjustments)
6.5
10.6
SG&A expenses associated with the
Calvin Klein restructuring
3.5
90.0
SG&A expenses associated with the
Socks and Hosiery transaction
59.8
SG&A expenses associated with the TH
U.S. store closures
54.9
SG&A expenses associated with the
Australia and TH CSAP acquisitions
2.1
2.8
SG&A expenses associated with the
refinancing of the Company’s senior credit facilities
1.0
SG&A expenses associated with the TH
China acquisition
6.3
19.9
Debt modification and extinguishment
costs
5.2
Noncash gain to write up the Company’s
equity investments in Gazal and PVH Australia to fair value
(recorded in other noncash gain)
(113.1
)
One-time expenses recorded on the
Company’s equity investments in Gazal and PVH Australia (recorded
in equity in net income of unconsolidated affiliates)
2.1
Earnings before interest and taxes on a
non-GAAP basis
$
281.6
$
288.6
$
780.6
$
777.9
Table 3 -
Reconciliations of GAAP gross profit to gross profit on a non-GAAP
basis
Quarter Ended
Nine Months Ended
11/3/19
11/3/19
Gross profit
$
1,406.2
$
3,990.5
Items excluded:
Gross profit charges associated with the
Calvin Klein restructuring (inventory markdowns)
12.9
Gross profit charges associated with the
Australia and TH CSAP acquisitions (short-lived noncash inventory
valuation adjustments)
6.5
10.6
Gross profit on a non-GAAP basis
$
1,412.7
$
4,014.0
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 4 -
Reconciliations of GAAP SG&A expenses to SG&A expenses on a
non-GAAP basis
Quarter Ended
Nine Months Ended
11/3/19
11/4/18
11/3/19
11/4/18
SG&A expenses
$
1,141.6
$
1,091.3
$
3,457.6
$
3,215.8
Items excluded:
Expenses associated with the Calvin Klein
restructuring
(3.5
)
(90.0
)
Expenses associated with the Socks and
Hosiery transaction
(59.8
)
Expenses associated with the TH U.S. store
closures
(54.9
)
Expenses associated with the Australia and
TH CSAP acquisitions
(2.1
)
(2.8
)
Expenses associated with the refinancing
of the Company’s senior credit facilities
(1.0
)
Expenses associated with the TH China
acquisition
(6.3
)
(19.9
)
SG&A expenses on a non-GAAP basis
$
1,136.0
$
1,085.0
$
3,249.1
$
3,195.9
Table 5 -
Reconciliation of GAAP debt modification and extinguishment costs
to debt modification and extinguishment costs on a non-GAAP
basis
Nine Months Ended
11/3/19
Debt modification and extinguishment
costs
$
5.2
Item excluded:
Costs incurred associated with the
refinancing of the Company’s senior credit facilities
(5.2
)
Debt modification and extinguishment costs
on a non-GAAP basis
$
—
Table 6 -
Reconciliation of GAAP other noncash gain to other noncash gain on
a non-GAAP basis
Nine Months Ended
11/3/19
Other noncash gain
$
113.1
Item excluded:
Noncash gain to write up the Company’s
equity investments in Gazal and PVH Australia to fair value
(113.1
)
Other noncash gain on a non-GAAP basis
$
—
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 7 -
Reconciliation of GAAP equity in net income of unconsolidated
affiliates to equity in net income of unconsolidated
affiliates
on a
non-GAAP basis
Nine Months Ended
11/3/19
Equity in net income of
unconsolidated affiliates
$
7.5
Item excluded:
One-time expenses recorded on the
Company’s equity investments in Gazal and PVH Australia
2.1
Equity in net income of
unconsolidated affiliates on a non-GAAP basis
$
9.6
Table 8 -
Reconciliations of GAAP interest expense, net to interest expense,
net on a non-GAAP basis
Quarter Ended
Nine Months Ended
11/3/19
11/3/19
Interest expense, net
$
27.8
$
84.7
Item excluded:
Expense resulting from the remeasurement
of the mandatorily redeemable non-controlling interest in
connection with the Australia acquisition
(2.6
)
(2.6
)
Interest expense, net on a non-GAAP
basis
$
25.2
$
82.1
Table 9 -
Reconciliations of GAAP income tax expense to income tax expense on
a non-GAAP basis
Quarter Ended
Nine Months Ended
11/3/19
11/4/18
11/3/19
11/4/18
Income tax expense
$
32.8
$
10.3
$
86.1
$
84.9
Item excluded:
Tax effects of pre-tax items identified as
non-GAAP exclusions (1)
(5.6
)
1.6
40.0
4.9
Income tax expense on a non-GAAP basis
$
27.2
$
11.9
$
126.1
$
89.8
(1)
The estimated tax effects associated with
the Company’s exclusions on a non-GAAP basis are based on the
Company’s assessment of deductibility. In making this assessment,
the Company evaluated each pre-tax item that it had identified
above as a non-GAAP exclusion to determine if such item is taxable
or tax deductible and, if so, in what jurisdiction the tax expense
or tax deduction would occur. All of the pre-tax items identified
as non-GAAP exclusions were identified as either primarily taxable
or tax deductible, with the tax effect taken at the applicable
income tax rate in the local jurisdiction, or as non-taxable or
non-deductible, in which case the Company assumed no tax
effect.
PVH CORP.
Reconciliations of GAAP to Non-GAAP
Amounts (continued)
(In millions)
Table 10 -
Reconciliations of GAAP depreciation and amortization expense to
depreciation and amortization expense on a non-GAAP
basis
Quarter Ended
Nine Months Ended
11/4/18
11/4/18
Depreciation and amortization expense
$
81.8
$
248.0
Item excluded:
Amortization of short-lived assets
associated with the TH China acquisition
(6.3
)
(19.9
)
Depreciation and amortization expense on a
non-GAAP basis
$
75.5
$
228.1
PVH CORP.
Notes to Consolidated GAAP Income Statements
(In millions, except per share data)
A. The Company computed its diluted net income per common share
as follows:
Quarter Ended
Quarter Ended
11/3/19
11/4/18
GAAP
Non-GAAP
GAAP
Non-GAAP
Results
Adjustments
(1)
Results
Results
Adjustments
(2)
Results
Net income attributable to PVH Corp.
$
209.2
$
(20.3
)
$
229.5
$
243.1
$
(4.7
)
$
247.8
Weighted average common shares
73.9
73.9
76.4
76.4
Weighted average dilutive securities
0.3
0.3
0.7
0.7
Total shares
74.2
74.2
77.1
77.1
Diluted net income per common share
attributable to PVH Corp.
$
2.82
$
3.10
$
3.15
$
3.21
Nine Months Ended
Nine Months Ended
11/3/19
11/4/18
GAAP
Non-GAAP
GAAP
Non-GAAP
Results
Adjustments
(1)
Results
Results
Adjustments
(2)
Results
Net income attributable to PVH Corp.
$
484.7
$
(88.8
)
$
573.5
$
587.7
$
(15.0
)
$
602.7
Weighted average common shares
74.6
74.6
76.8
76.8
Weighted average dilutive securities
0.4
0.4
0.9
0.9
Total shares
75.0
75.0
77.7
77.7
Diluted net income per common share
attributable to PVH Corp.
$
6.46
$
7.64
$
7.56
$
7.75
(1)
Represents the impact on net income in the
periods ended November 3, 2019 from the elimination of (i) the
costs related to the Calvin Klein restructuring; (ii) the costs in
connection with the TH U.S. store closures; (iii) the costs in
connection with the refinancing of the Company’s senior credit
facilities; (iv) the costs related to the Australia and TH CSAP
acquisitions, primarily consisting of noncash valuation
adjustments; (v) the noncash gain recorded to write up the
Company’s equity investments in Gazal and PVH Australia to fair
value in connection with the Australia acquisition; (vi) the
one-time costs recorded on the Company’s equity investments in
Gazal and PVH Australia prior to the Australia acquisition closing;
(vii) the costs in connection with the Socks and Hosiery
transaction; (viii) the expense resulting from the remeasurement of
the Company’s mandatorily redeemable non-controlling interest
recognized in connection with the Australia acquisition; and (ix)
the tax effects associated with the foregoing pre-tax items. Please
see Table 1 for the reconciliation of GAAP net income to net income
on a non-GAAP basis.
(2)
Represents the impact on net income in the
periods ended November 4, 2018 from the elimination of the costs
related to the TH China acquisition, consisting of noncash
amortization of short-lived assets, and the resulting tax effect.
Please see Table 1 for the reconciliation of GAAP net income to net
income on a non-GAAP basis.
PVH CORP.
Consolidated Balance Sheets
(In millions)
11/3/19
11/4/18
ASSETS
Current Assets:
Cash and Cash Equivalents
$
555.2
$
398.5
Receivables
998.8
965.6
Inventories
1,768.1
1,686.9
Other
260.0
256.8
Total Current Assets
3,582.1
3,307.8
Property, Plant and Equipment
994.7
923.7
Operating Lease Right-of-Use Assets
(1)
1,648.1
Goodwill and Other Intangible Assets
7,458.1
7,230.2
Other Assets
336.2
369.2
$
14,019.2
$
11,830.9
LIABILITIES, REDEEMABLE NON-CONTROLLING
INTEREST AND STOCKHOLDERS’ EQUITY
Accounts Payable and Accrued Expenses
$
1,776.6
$
1,621.9
Current Portion of Operating Lease
Liabilities (1)
347.3
Short-Term Borrowings
387.5
276.7
Current Portion of Long-Term Debt
41.3
—
Other Liabilities
1,226.4
1,372.3
Long-Term Portion of Operating Lease
Liabilities (1)
1,517.5
Long-Term Debt
2,738.4
2,878.3
Redeemable Non-Controlling Interest
(0.9
)
0.5
Stockholders’ Equity
5,985.1
5,681.2
$
14,019.2
$
11,830.9
Note: Year over year balances are impacted
by changes in foreign currency exchange rates.
(1) Operating Lease Right-of-Use Assets,
Current Portion of Operating Lease Liabilities and Long-Term
Portion of Operating Lease Liabilities as of November 3, 2019
reflect the impact of the adoption of the new lease accounting
standard in the first quarter of 2019.
PVH CORP.
Segment Data
(In millions)
REVENUE BY
SEGMENT
Quarter Ended
Quarter Ended
11/3/19
11/4/18
Tommy Hilfiger North
America
Net sales
$
388.8
$
394.9
Royalty revenue
25.8
23.8
Advertising and other revenue
8.2
5.6
Total
422.8
424.3
Tommy Hilfiger
International
Net sales
803.7
688.1
Royalty revenue
12.3
14.4
Advertising and other revenue
5.1
5.7
Total
821.1
708.2
Total Tommy
Hilfiger
Net sales
1,192.5
1,083.0
Royalty revenue
38.1
38.2
Advertising and other revenue
13.3
11.3
Total
1,243.9
1,132.5
Calvin Klein North
America
Net sales
386.1
420.3
Royalty revenue
49.9
45.9
Advertising and other revenue
19.3
14.8
Total
455.3
481.0
Calvin Klein
International
Net sales
486.8
452.8
Royalty revenue
19.3
21.7
Advertising and other revenue
7.5
7.7
Total
513.6
482.2
Total Calvin
Klein
Net sales
872.9
873.1
Royalty revenue
69.2
67.6
Advertising and other revenue
26.8
22.5
Total
968.9
963.2
Heritage Brands
Wholesale
Net sales
305.7
357.9
Royalty revenue
4.9
5.4
Advertising and other revenue
0.9
1.0
Total
311.5
364.3
Heritage Brands
Retail
Net sales
62.4
63.4
Royalty revenue
0.9
1.0
Advertising and other revenue
0.1
0.1
Total
63.4
64.5
Total Heritage
Brands
Net sales
368.1
421.3
Royalty revenue
5.8
6.4
Advertising and other revenue
1.0
1.1
Total
374.9
428.8
Total
Revenue
Net sales
2,433.5
2,377.4
Royalty revenue
113.1
112.2
Advertising and other revenue
41.1
34.9
Total
$
2,587.7
$
2,524.5
PVH CORP.
Segment Data (continued)
(In millions)
EARNINGS BEFORE
INTEREST AND TAXES BY SEGMENT
Quarter Ended
Quarter Ended
11/3/19
11/4/18
Results
Results
Under
Non-GAAP
Under
Non-GAAP
GAAP
Adjustments(1)
Results
GAAP
Adjustments(2)
Results
Tommy Hilfiger North America
$
39.3
$
—
$
39.3
$
64.6
$
64.6
Tommy Hilfiger International
137.6
(5.4
)
143.0
112.6
$
(6.3
)
118.9
Total Tommy Hilfiger
176.9
(5.4
)
182.3
177.2
(6.3
)
183.5
Calvin Klein North America
64.6
(0.9
)
65.5
51.2
51.2
Calvin Klein International
58.7
(5.0
)
63.7
69.7
69.7
Total Calvin Klein
123.3
(5.9
)
129.2
120.9
120.9
Heritage Brands Wholesale
14.5
(0.8
)
15.3
23.8
23.8
Heritage Brands Retail
(0.8
)
(0.8
)
0.4
0.4
Total Heritage Brands
13.7
(0.8
)
14.5
24.2
24.2
Corporate
(44.4
)
—
(44.4
)
(40.0
)
(40.0
)
Total earnings before interest and
taxes
$
269.5
$
(12.1
)
$
281.6
$
282.3
$
(6.3
)
$
288.6
(1)
The adjustments for the quarter ended
November 3, 2019 represent the elimination of (i) the costs related
to the Calvin Klein restructuring and (ii) the costs related to the
Australia and TH CSAP acquisitions, primarily consisting of noncash
valuation adjustments.
(2)
The adjustment for the quarter ended
November 4, 2018 represents the elimination of the costs related to
the TH China acquisition, consisting of noncash amortization of
short-lived assets.
PVH CORP.
Segment Data (continued)
(In millions)
REVENUE BY
SEGMENT
Nine Months Ended
Nine Months Ended
11/3/19
11/4/18
Tommy Hilfiger North
America
Net sales
$
1,126.7
$
1,151.6
Royalty revenue
62.6
56.7
Advertising and other revenue
18.3
13.8
Total
1,207.6
1,222.1
Tommy Hilfiger
International
Net sales
2,145.4
1,897.6
Royalty revenue
37.9
39.4
Advertising and other revenue
15.3
17.8
Total
2,198.6
1,954.8
Total Tommy
Hilfiger
Net sales
3,272.1
3,049.2
Royalty revenue
100.5
96.1
Advertising and other revenue
33.6
31.6
Total
3,406.2
3,176.9
Calvin Klein North
America
Net sales
1,130.6
1,212.6
Royalty revenue
114.8
111.9
Advertising and other revenue
42.7
38.5
Total
1,288.1
1,363.0
Calvin Klein
International
Net sales
1,368.3
1,336.9
Royalty revenue
55.1
56.2
Advertising and other revenue
20.3
22.2
Total
1,443.7
1,415.3
Total Calvin
Klein
Net sales
2,498.9
2,549.5
Royalty revenue
169.9
168.1
Advertising and other revenue
63.0
60.7
Total
2,731.8
2,778.3
Heritage Brands
Wholesale
Net sales
960.4
1,000.7
Royalty revenue
15.0
15.8
Advertising and other revenue
3.1
3.0
Total
978.5
1,019.5
Heritage Brands
Retail
Net sales
188.4
194.7
Royalty revenue
2.9
3.1
Advertising and other revenue
0.4
0.3
Total
191.7
198.1
Total Heritage
Brands
Net sales
1,148.8
1,195.4
Royalty revenue
17.9
18.9
Advertising and other revenue
3.5
3.3
Total
1,170.2
1,217.6
Total
Revenue
Net sales
6,919.8
6,794.1
Royalty revenue
288.3
283.1
Advertising and other revenue
100.1
95.6
Total
$
7,308.2
$
7,172.8
PVH CORP.
Segment Data (continued)
(In millions)
EARNINGS BEFORE
INTEREST AND TAXES BY SEGMENT
Nine Months Ended
Nine Months Ended
11/3/19
11/4/18
Results
Results
Under
Non-GAAP
Under
Non-GAAP
GAAP
Adjustments(1)
Results
GAAP
Adjustments(2)
Results
Tommy Hilfiger North America
$
72.9
$
(62.4
)
$
135.3
$
179.6
$
179.6
Tommy Hilfiger International
344.2
(7.9
)
352.1
263.6
$
(19.9
)
283.5
Total Tommy Hilfiger
417.1
(70.3
)
487.4
443.2
(19.9
)
463.1
Calvin Klein North America
77.3
(91.5
)
168.8
154.5
154.5
Calvin Klein International
112.2
(67.6
)
179.8
180.0
180.0
Total Calvin Klein
189.5
(159.1
)
348.6
334.5
334.5
Heritage Brands Wholesale
67.5
(1.2
)
68.7
90.1
90.1
Heritage Brands Retail
3.3
3.3
8.3
8.3
Total Heritage Brands
70.8
(1.2
)
72.0
98.4
98.4
Corporate
(23.0
)
104.4
(127.4
)
(118.1
)
(118.1
)
Total earnings before interest and
taxes
$
654.4
$
(126.2
)
$
780.6
$
758.0
$
(19.9
)
$
777.9
(1)
The adjustments for the nine months ended
November 3, 2019 represent the elimination of (i) the costs related
to the Calvin Klein restructuring; (ii) the costs in connection
with the TH U.S. store closures; (iii) the costs in connection with
the refinancing of the Company’s senior credit facilities; (iv) the
costs related to the Australia and TH CSAP acquisitions, primarily
consisting of noncash valuation adjustments; (v) the noncash gain
recorded to write up the Company’s equity investments in Gazal and
PVH Australia to fair value in connection with the Australia
acquisition; (vi) the one-time costs recorded on the Company’s
equity investments in Gazal and PVH Australia prior to the
Australia acquisition closing; and (vii) the costs in connection
with the Socks and Hosiery transaction.
(2)
The adjustment for the nine months ended
November 4, 2018 represents the elimination of the costs related to
the TH China acquisition, consisting of noncash amortization of
short-lived assets.
PVH CORP. Reconciliations of 2019 Constant Currency Revenue
(In millions)
As a supplement to the Company’s reported operating results, the
Company presents constant currency revenue information, which is a
non-GAAP financial measure. The Company presents results in this
manner because it is a global company that transacts business in
multiple currencies but reports financial information in U.S.
dollars. Foreign currency exchange rate fluctuations affect the
amounts reported by the Company in U.S. dollars with respect to its
foreign revenues. Exchange rate fluctuations can have a significant
effect on reported revenues. The Company believes presenting
constant currency revenue information provides useful information
to investors, as it provides information to assess how its
businesses performed excluding the effects of changes in foreign
currency exchange rates and assists investors in evaluating the
effectiveness of the Company’s operations and underlying business
trends in a manner that is consistent with management’s evaluation
of business performance.
The Company calculates constant currency revenue information by
translating its foreign revenues for the current year period into
U.S. dollars at the average exchange rates in effect during the
comparable prior year period (rather than at the actual exchange
rates in effect during the current year period).
Constant currency performance should be viewed in addition to,
and not in lieu of or as superior to, the Company’s operating
performance calculated in accordance with GAAP. The constant
currency revenue information presented may not be comparable to
similarly described measures reported by other companies.
GAAP Revenue
% Change
Quarter Ended
GAAP
Negative Impact of Foreign
Exchange
Constant Currency
11/3/19
11/4/18
Tommy Hilfiger North America
$
422.8
$
424.3
(0.4
)%
(0.3
)%
(0.1
)%
Tommy Hilfiger International
821.1
708.2
15.9
%
(4.0
)%
19.9
%
Total Tommy Hilfiger
1,243.9
1,132.5
9.8
%
(2.6
)%
12.4
%
Calvin Klein North America
$
455.3
$
481.0
(5.3
)%
(0.1
)%
(5.2
)%
Calvin Klein International
513.6
482.2
6.5
%
(3.7
)%
10.2
%
Total Calvin Klein
968.9
963.2
0.6
%
(1.9
)%
2.5
%
Total Revenue
$
2,587.7
$
2,524.5
2.5
%
(1.9
)%
4.4
%
GAAP Revenue
% Change
Nine Months Ended
GAAP
Negative Impact of Foreign
Exchange
Constant Currency
11/3/19
11/4/18
Total Tommy Hilfiger
$
3,406.2
$
3,176.9
7.2
%
(3.5
)%
10.7
%
Total Calvin Klein
$
2,731.8
$
2,778.3
(1.7
)%
(2.6
)%
0.9
%
Total Revenue
$
7,308.2
$
7,172.8
1.9
%
(2.6
)%
4.5
%
PVH CORP. Full Year and Quarterly Reconciliations of GAAP to
Non-GAAP Amounts
The Company is presenting its 2019 estimated results on a
non-GAAP basis by excluding (i) the costs incurred and expected to
be incurred related to the Calvin Klein restructuring, consisting
of a noncash lease asset impairment resulting from the closure of
the Company’s flagship store on Madison Avenue in New York, New
York; other noncash asset impairments; severance; contract
termination and other costs; and inventory markdowns; (ii) the
costs incurred in connection with the TH U.S. store closures,
primarily consisting of noncash lease asset impairments; (iii) the
costs incurred in connection with the refinancing of the Company’s
senior credit facilities; (iv) the costs incurred and expected to
be incurred related to the Australia and TH CSAP acquisitions,
primarily consisting of noncash valuation adjustments; (v) the
noncash gain recorded to write up the Company's equity investments
in Gazal and PVH Australia to fair value in connection with the
Australia acquisition; (vi) the one-time costs recorded on the
Company’s equity investments in Gazal and PVH Australia prior to
the Australia acquisition closing, (vii) the costs incurred in
connection with the Socks and Hosiery transaction; (viii) the
expenses incurred and expected to be incurred resulting from the
remeasurements of the mandatorily redeemable non-controlling
interest recognized in connection with the Australia acquisition;
and (ix) the estimated tax effects associated with the foregoing
pre-tax items. The Company has provided the reconciliations set
forth below to present its estimates on a GAAP basis and excluding
the foregoing amounts.
The 2019 estimated results are presented on both a GAAP and
non-GAAP basis. The Company believes presenting these results on a
non-GAAP basis provides useful additional information to investors.
The Company excludes such amounts that it deems to be non-recurring
or non-operational and believes that excluding them (i) facilitates
comparing current results against past and future results by
eliminating amounts that it believes are not comparable between
periods, thereby permitting management to evaluate performance and
investors to make decisions based on the ongoing operations of the
Company, and (ii) assists investors in evaluating the effectiveness
of the Company’s operations and underlying business trends in a
manner that is consistent with management’s evaluation of business
performance. The Company uses its results excluding these amounts
to evaluate its operating performance and to discuss its business
with investment institutions, the Company’s Board of Directors and
others. The Company’s results excluding the items described above
are also the basis for certain incentive compensation calculations.
The non-GAAP measures should be viewed in addition to, and not in
lieu of or as superior to, the Company’s operating performance
measures calculated in accordance with GAAP. The information
presented on a non-GAAP basis may not be comparable to similarly
titled measures reported by other companies.
The estimated tax effects associated with the above pre-tax
items are based on the Company’s assessment of deductibility. In
making this assessment, the Company evaluated each pre-tax item
identified above as a non-GAAP exclusion to determine if such item
is taxable or tax deductible, and, if so, in what jurisdiction the
tax expense or tax deduction would occur. All of the pre-tax items
identified as non-GAAP exclusions were identified as either
primarily taxable or tax deductible, with the tax effect taken at
the applicable income tax rate in the local jurisdiction, or as
non-taxable or non-deductible, in which case the Company assumed no
tax effect.
2019 Net Income
Per Common Share Reconciliations
Current Guidance
Previous Guidance
Full Year 2019 (Estimated)
Fourth Quarter 2019
(Estimated)
Full Year 2019 (Estimated)
Third Quarter 2019
(Estimated)
GAAP net income per common share
attributable to PVH Corp.
$8.04 - $8.06
$1.56 - $1.58
$7.95 - $8.05
$2.70 - $2.75
Estimated per common share impact of items
identified as non-GAAP exclusions
$(1.39)
$(0.21)
$(1.35)
$(0.25)
Net income per common share attributable
to PVH Corp. on a non-GAAP basis
$9.43 - $9.45
$1.77 - $1.79
$9.30 - $9.40
$2.95 - $3.00
2019 Tax Rate
Reconciliations
Full Year 2019 (Estimated)
Fourth Quarter 2019
(Estimated)
GAAP tax rate
11.5% - 12.0%
(4.0)% - (8.0)%
Estimated tax rate impacts from items
identified as non-GAAP exclusions
(2.5)%
1.5%
Tax rate on a non-GAAP basis
14.0% - 14.5%
(5.5)% - (9.5)%
The GAAP net income per common share attributable to PVH Corp.
amounts presented in the above table, as well as the amounts
excluded in providing non-GAAP earnings guidance, would be expected
to change as a result of (i) acquisition, restructuring, divestment
or similar transactions or activities, (ii) the timing and strategy
of restructuring and integration initiatives or other one-time
events, if any, that the Company engages in or suffers during the
period, (iii) any market or other changes affecting the Company’s
expected actuarial gain or loss on retirement plans, (iv) the
imposition of significant tariffs, or a significant increase to
existing tariffs, on apparel, footwear and accessories imported
from China or any of the Company’s other significant sourcing
countries, or (v) any discrete tax events including changes in tax
rates or tax law and events arising from audits or the resolution
of uncertain tax positions. The Company has no current
understanding or agreement regarding any such transaction or
definitive plans regarding any such activity identified in clause
(i) or (ii) that has not been announced or completed.
2019 Constant
Currency Revenue Reconciliations
Full Year 2019 (Estimated)
(Consolidated)
Full Year 2019 (Estimated) (Tommy
Hilfiger)
Full Year 2019 (Estimated)
(Calvin Klein)
Fourth Quarter 2019 (Estimated)
(Consolidated)
Fourth Quarter 2019 (Estimated)
(Tommy Hilfiger)
Fourth Quarter 2019 (Estimated)
(Calvin Klein)
GAAP revenue increase (decrease)
1%
6%
(2)%
—%
4%
(5)%
Negative impact of foreign exchange
(3)%
(3)%
(2)%
(2)%
(2)%
(2)%
Non-GAAP revenue increase (decrease) on a
constant currency basis
4%
9%
—%
2%
6%
(3)%
Please refer to the section entitled “Reconciliations of 2019
Constant Currency Revenue” for a description of the presentation of
constant currency amounts.
Reconciliations
of GAAP Diluted Net Income Per Common Share to Diluted Net Income
Per Common Share on a Non-GAAP Basis
Full Year 2018
Fourth Quarter 2018
(Actual)
(Actual)
(In millions, except
per share data)
Results Under GAAP
Adjustments
(1)
Non- GAAP Results
Results Under GAAP
Adjustments
(2)
Non- GAAP Results
Net income
$
746.4
$
4.0
$
742.4
$
158.7
$
19.0
$
139.7
Total weighted average shares
77.3
77.3
76.1
76.1
Diluted net income per common share
$
9.65
$
9.60
$
2.09
$
1.84
(1)
Represents the impact on net income in the
year ended February 3, 2019 from the elimination of (i) a $15.0
million recognized actuarial loss on retirement plans; (ii) $23.6
million of costs related to the TH China acquisition, consisting of
noncash amortization of short-lived assets; (iii) $40.7 million of
costs related to the Calvin Klein restructuring, primarily
consisting of severance, noncash asset impairments, contract
termination and other costs, and inventory markdowns; (iv) $17.5
million of tax benefits associated with the foregoing pre-tax
items; (v) a $24.7 million discrete net tax benefit associated with
the U.S. Tax Cuts and Jobs Act of 2017 (the “U.S. Tax
Legislation”); and (vi) a $41.1 million discrete tax benefit
related to the remeasurement of certain of the Company’s net
deferred tax liabilities in connection with the enactment of
legislation in the Netherlands known as the “2019 Dutch Tax
Plan.”
(2)
Represents the impact on net income in the
quarter ended February 3, 2019 from the elimination of (i) a $15.0
million recognized actuarial loss on retirement plans; (ii) $3.7
million of costs related to the TH China acquisition, consisting of
noncash amortization of short-lived assets; (iii) $40.7 million of
costs related to the Calvin Klein restructuring, primarily
consisting of severance, noncash asset impairments, contract
termination and other costs, and inventory markdowns; (iv) $12.6
million of tax benefits associated with the foregoing pre-tax
items; (v) a $24.7 million discrete net tax benefit associated with
the U.S. Tax Legislation; and (vi) a $41.1 million discrete tax
benefit related to the remeasurement of certain of the Company’s
net deferred tax liabilities in connection with the 2019 Dutch Tax
Plan.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191125005706/en/
Dana Perlman Treasurer, Senior Vice President,
Business Development and Investor Relations (212)
381-3502 investorrelations@pvh.com
PVH (NYSE:PVH)
Historical Stock Chart
From Mar 2024 to Apr 2024
PVH (NYSE:PVH)
Historical Stock Chart
From Apr 2023 to Apr 2024
