-
First quarter revenue increased 2% to
$2.158 billion compared to the prior year period (increased 5% on a constant currency basis) and exceeded guidance of relatively flat to the prior year period (increase approximately 3% on a constant currency basis) -
First quarter EPS of
$2.14 exceeded guidance of approximately$1.90 -
Full year outlook
- Revenue: Reaffirms projected increase of 3% to 4% (increase 2% to 3% on a constant currency basis)
- Operating margin: Reaffirms outlook approximately 10%
-
EPS: Reaffirms outlook of approximately
$10.00
Non-GAAP Amounts:
Amounts stated to be on a non-GAAP basis exclude the items that are defined or described in greater detail near the end of this release under the heading “Non-GAAP Exclusions.” Amounts stated on a constant currency basis also are deemed to be on a non-GAAP basis. Reconciliations of amounts on a GAAP basis to amounts on a non-GAAP basis are presented after the Non-GAAP Exclusions section and identify and quantify all excluded items.
First Quarter Review:
-
Revenue increased 2% compared to the prior year period (increased 5% on a constant currency basis). The Company’s revenue growth was driven by solid performance in its international businesses, particularly in the
Asia Pacific region, including 44% growth in local currency inChina following the lifting of COVID restrictions in the fourth quarter of 2022, and continued growth inEurope in euros. The increase also reflected strong growth in theNorth America direct-to-consumer business.- Direct-to-consumer revenue increased 8% compared to the prior year period (increased 12% on a constant currency basis), with strong growth in both the Company’s owned and operated stores and owned and operated digital commerce business.
- Wholesale revenue decreased 2% compared to the prior year period (increased 1% on a constant currency basis).
- Owned and operated digital commerce revenue increased 4% compared to the prior year period (increased 8% on a constant currency basis). Total digital revenue decreased 3% compared to the prior year period (decreased 1% on a constant currency basis). The strong growth in the Company’s owned and operated digital commerce business was more than offset by a decrease in wholesale sales to the Company’s wholesale.com and pure play customers. Digital penetration as a percentage of total revenue was approximately 20%.
- Gross margin was 57.9% compared to 58.4% in the prior year period. The benefits from price increases, lower freight costs, and a favorable shift in regional and channel mix were more than offset by higher product costs, including an approximately 150 basis point negative impact on inventory costs due to foreign currency exchange rates.
- Inventory levels have decreased compared to the fourth quarter of 2022, with improvement in all regions. Inventory was 24% higher than the prior year’s first quarter due to a combination of (i) abnormally low inventory levels in the prior year period, (ii) early receipts of inventory, and (iii) higher product costs.
First Quarter Consolidated Results:
-
Revenue increased 2% to
$2.158 billion compared to the prior year period (increased 5% on a constant currency basis).-
Tommy Hilfiger revenue increased 5% compared to the prior year period (increased 8% on a constant currency basis)-
Tommy Hilfiger International revenue increased 3% (increased 7% on a constant currency basis) -
Tommy Hilfiger North America revenue increased 11%
-
-
Calvin Klein revenue was flat compared to the prior year period (increased 3% on a constant currency basis)-
Calvin Klein International revenue increased 7% (increased 11% on a constant currency basis) -
Calvin Klein North America revenue decreased 12%. Continued growth in the direct-to-consumer business was more than offset by a decrease in the wholesale business.
-
- Heritage Brands revenue decreased 12% compared to the prior year period
-
-
Earnings before interest and taxes (“EBIT”) was
$199 million , inclusive of a$9 million negative impact due to foreign currency translation, compared to$210 million in the prior year period. The revenue growth on a constant currency basis was offset by lower gross margins, including the approximately 150 basis point negative impact on inventory costs due to foreign currency exchange rates, discussed above. The Company continues to take a disciplined approach to managing expenses, driving cost efficiencies while making targeted investments to drive its strategic initiatives. -
Earnings per share (“EPS”) was
$2.14 , a 10% increase compared to$1.94 in the prior year period. EPS for the first quarter included the negative impact of$0.11 per share related to foreign currency translation. -
Interest expense of
$22 million was flat as compared to the prior year period. - Effective tax rate was 23.1% as compared to 29.4% in the prior year period.
2023 Outlook:
Full Year 2023 Guidance
- Revenue is projected to increase 3% to 4% as compared to 2022 (increase 2% to 3% on a constant currency basis).
- Operating margin is projected to be approximately 10%.
-
EPS is projected to be approximately
$10.00 compared to$3.03 on a GAAP basis and$8.97 on a non-GAAP basis in 2022. The 2023 EPS projection includes the estimated positive impact of approximately$0.15 per share related to foreign currency translation. EPS on a GAAP basis for 2022 included the amounts described under the heading “Non-GAAP Exclusions” later in this release. EPS on a non-GAAP basis excluded these amounts. -
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 24%.
Second Quarter 2023 Guidance
- Revenue is projected to increase low single-digits as compared to the second quarter of 2022.
-
EPS is projected to be approximately
$1.70 compared to$1.72 on a GAAP basis and$2.08 on a non-GAAP basis in the second quarter of 2022. The second quarter 2023 EPS projection includes the estimated positive impact of approximately$0.05 per share related to foreign currency translation. EPS on a GAAP basis for the second quarter of 2022 included the amounts described under the heading “Non-GAAP Exclusions” later in this release. EPS on a non-GAAP basis excluded these amounts. -
Interest expense is projected to increase to approximately
$25 million compared to$20 million in the second quarter of 2022. - Effective tax rate is projected to be approximately 26%.
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.
Non-GAAP Exclusions:
The discussions in this release that refer to non-GAAP amounts exclude the following:
-
Pre-tax gain of
$78 million recorded in the fourth quarter of 2022 related to the recognized actuarial gain on retirement plans. -
Pre-tax noncash goodwill impairment charge of
$417 million recorded in the third quarter of 2022, which was non-operational and driven by a significant increase in discount rates. -
Pre-tax costs of
$20 million incurred in 2022, consisting of severance related to initial actions under the plans announced inAugust 2022 to reduce people costs in the Company’s global offices by approximately 10% by the end of 2023, of which$17 million was incurred in the third quarter and$4 million was incurred in the fourth quarter. -
Pre-tax net costs of
$43 million recorded in 2022 in connection with the Company’s decision to exit from itsRussia business, primarily consisting of noncash asset impairments and a gain on contract terminations, of which$50 million of charges were recorded in the second quarter and an$8 million gain was recorded in the fourth quarter. -
Pre-tax gain of
$16 million recorded in the second quarter of 2022 in connection with the sale of the Company’s equity investment inKarl Lagerfeld Holding B.V . - 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 was (i) taxable or tax deductible, in which case the tax effect was taken at the applicable income tax rate in the local jurisdiction, or (ii) non-taxable or non-deductible, in which case the Company assumed no tax effect.
The Company presents constant currency revenue information, which is a non-GAAP financial measure, because it is a global company that transacts business in multiple currencies and reports financial information in
The Company presents non-GAAP financial measures, including constant currency revenue information, as a supplement to its GAAP results. The Company believes presenting non-GAAP financial measures provides useful information to investors, as it provides information to assess how its businesses performed excluding the effects of non-recurring and non-operational amounts and the effects of changes in foreign currency exchange rates, as applicable, and (i) facilitates comparing the results being reported against past and future results by eliminating amounts that it believes are not comparable between periods 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 non-recurring and non-operational amounts are also the basis for certain incentive compensation calculations. Non-GAAP financial measures 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 non-GAAP financial measures presented may not be comparable to similarly described measures reported by other companies.
Please see the sections entitled “Reconciliations of 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.
Conference Call Information:
The Company will host a conference call to discuss its first quarter earnings release on
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, 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’s ability to realize anticipated benefits and savings from divestitures, restructurings and similar plans, such as the headcount cost reduction initiative announced in |
Consolidated GAAP Statements of Operations (In millions, except per share data) |
||||||||
|
|
|
|
|
|
|
||
|
|
Quarter Ended |
|
|
||||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net sales |
|
$ |
2,051.1 |
|
$ |
2,006.6 |
|
|
Royalty revenue |
|
|
84.7 |
|
|
90.0 |
|
|
Advertising and other revenue |
|
|
22.1 |
|
|
26.1 |
|
|
Total revenue |
|
$ |
2,157.9 |
|
$ |
2,122.7 |
|
|
|
|
|
|
|
|
|
||
Gross profit |
|
$ |
1,250.3 |
|
$ |
1,238.7 |
|
|
|
|
|
|
|
|
|
||
Selling, general and administrative expenses |
|
|
1,064.0 |
|
|
1,039.4 |
|
|
|
|
|
|
|
|
|
||
Non-service related pension and postretirement income |
|
|
0.6 |
|
|
3.6 |
|
|
|
|
|
|
|
|
|
||
Equity in net income of unconsolidated affiliates |
|
|
11.9 |
|
|
7.4 |
|
|
|
|
|
|
|
|
|
||
Earnings before interest and taxes |
|
|
198.8 |
|
|
210.3 |
|
|
|
|
|
|
|
|
|
||
Interest expense, net |
|
|
22.0 |
|
|
21.8 |
|
|
|
|
|
|
|
|
|
||
Pre-tax income |
|
|
176.8 |
|
|
188.5 |
|
|
|
|
|
|
|
|
|
||
Income tax expense |
|
|
40.8 |
|
|
55.4 |
|
|
|
|
|
|
|
|
|
||
Net income |
|
$ |
136.0 |
|
$ |
133.1 |
|
|
|
|
|
|
|
|
|
||
Diluted net income per common share (1) |
|
$ |
2.14 |
|
$ |
1.94 |
|
|
|
|
|
|
|
|
|
||
|
|
Quarter Ended |
|
|
||||
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Depreciation and amortization expense |
|
$ |
72.3 |
|
$ |
76.8 |
|
|
|
|
|
|
|
|
(1) | Please see Note A in Notes to Consolidated GAAP Statements of Operations for the computations of the Company’s diluted net income per common share. |
Notes to Consolidated GAAP Statements of Operations (In millions, except per share data) |
|||||||||
A. The Company computed its diluted net income per common share as follows: | |||||||||
|
|
Quarter Ended |
|
|
|
Quarter Ended |
|||
|
|
|
|
|
|
|
|||
|
|
GAAP |
|
|
|
GAAP |
|
||
|
|
Results |
|
|
|
Results |
|
||
|
|
|
|
|
|
|
|
||
Net income |
|
$ |
136.0 |
|
|
|
$ |
133.1 |
|
|
|
|
|
|
|
|
|
||
Weighted average common shares |
|
|
62.7 |
|
|
|
|
68.0 |
|
Weighted average dilutive securities |
|
|
0.8 |
|
|
|
|
0.7 |
|
Total shares |
|
|
63.5 |
|
|
|
|
68.7 |
|
|
|
|
|
|
|
|
|
||
Diluted net income per common share |
|
$ |
2.14 |
|
|
|
$ |
1.94 |
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets (In millions) |
|||||
|
|
|
|
||
ASSETS |
|
|
|
||
Current Assets: |
|
|
|
||
Cash and Cash Equivalents |
$ |
373.8 |
|
$ |
748.7 |
Receivables |
|
928.3 |
|
|
872.5 |
Inventories |
|
1,718.1 |
|
|
1,389.7 |
Other |
|
333.0 |
|
|
354.1 |
Total Current Assets |
|
3,353.2 |
|
|
3,365.0 |
Property, Plant and Equipment |
|
885.7 |
|
|
863.3 |
Operating Lease Right-of-Use Assets |
|
1,282.1 |
|
|
1,312.5 |
|
|
5,588.7 |
|
|
5,998.1 |
Other Assets |
|
381.5 |
|
|
350.4 |
TOTAL ASSETS |
$ |
11,491.2 |
|
$ |
11,889.3 |
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|||||
Accounts Payable and Accrued Expenses |
$ |
1,924.7 |
|
$ |
2,018.9 |
Current Portion of Operating Lease Liabilities |
|
342.2 |
|
|
358.1 |
Short-Term Borrowings |
|
17.3 |
|
|
15.5 |
Current Portion of Long-Term Debt |
|
112.0 |
|
|
36.2 |
Other Liabilities |
|
652.6 |
|
|
803.9 |
Long-Term Portion of Operating Lease Liabilities |
|
1,123.0 |
|
|
1,171.7 |
Long-Term Debt |
|
2,193.0 |
|
|
2,216.5 |
Stockholders’ Equity |
|
5,126.4 |
|
|
5,268.5 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ |
11,491.2 |
|
$ |
11,889.3 |
Note: Year over year balances are impacted by changes in foreign currency exchange rates. |
Segment Data (In millions) |
|||||||||
|
|
|
|
|
|
|
|
||
REVENUE BY SEGMENT |
|
|
|
|
|
|
|
||
|
|
Quarter Ended |
|
|
|
Quarter Ended |
|
||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Net sales |
|
$ |
266.7 |
|
|
|
$ |
235.5 |
|
Royalty revenue |
|
|
20.3 |
|
|
|
|
20.8 |
|
Advertising and other revenue |
|
|
4.5 |
|
|
|
|
5.2 |
|
Total |
|
|
291.5 |
|
|
|
|
261.5 |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Net sales |
|
|
812.8 |
|
|
|
|
790.3 |
|
Royalty revenue |
|
|
15.7 |
|
|
|
|
14.5 |
|
Advertising and other revenue |
|
|
4.3 |
|
|
|
|
4.6 |
|
Total |
|
|
832.8 |
|
|
|
|
809.4 |
|
|
|
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
|
||
Net sales |
|
|
1,079.5 |
|
|
|
|
1,025.8 |
|
Royalty revenue |
|
|
36.0 |
|
|
|
|
35.3 |
|
Advertising and other revenue |
|
|
8.8 |
|
|
|
|
9.8 |
|
Total |
|
|
1,124.3 |
|
|
|
|
1,070.9 |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Net sales |
|
|
227.7 |
|
|
|
|
256.9 |
|
Royalty revenue |
|
|
35.7 |
|
|
|
|
42.2 |
|
Advertising and other revenue |
|
|
10.9 |
|
|
|
|
14.0 |
|
Total |
|
|
274.3 |
|
|
|
|
313.1 |
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
Net sales |
|
|
598.3 |
|
|
|
|
558.6 |
|
Royalty revenue |
|
|
12.8 |
|
|
|
|
12.3 |
|
Advertising and other revenue |
|
|
2.3 |
|
|
|
|
2.2 |
|
Total |
|
|
613.4 |
|
|
|
|
573.1 |
|
|
|
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
|
||
Net sales |
|
|
826.0 |
|
|
|
|
815.5 |
|
Royalty revenue |
|
|
48.5 |
|
|
|
|
54.5 |
|
Advertising and other revenue |
|
|
13.2 |
|
|
|
|
16.2 |
|
Total |
|
|
887.7 |
|
|
|
|
886.2 |
|
|
|
|
|
|
|
|
|
||
Heritage Brands Wholesale |
|
|
|
|
|
|
|
||
Net sales |
|
|
145.6 |
|
|
|
|
165.3 |
|
Royalty revenue |
|
|
0.2 |
|
|
|
|
0.2 |
|
Advertising and other revenue |
|
|
0.1 |
|
|
|
|
0.1 |
|
Total |
|
|
145.9 |
|
|
|
|
165.6 |
|
|
|
|
|
|
|
|
|
||
Total Revenue |
|
|
|
|
|
|
|
||
Net sales |
|
|
2,051.1 |
|
|
|
|
2,006.6 |
|
Royalty revenue |
|
|
84.7 |
|
|
|
|
90.0 |
|
Advertising and other revenue |
|
|
22.1 |
|
|
|
|
26.1 |
|
Total |
|
$ |
2,157.9 |
|
|
|
$ |
2,122.7 |
|
|
|
|
|
|
|
|
|
Segment Data (continued) (In millions) |
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
||||
EARNINGS BEFORE INTEREST AND TAXES BY SEGMENT |
|
||||||||||
|
|
|
|
|
|
|
|
||||
|
|
Quarter Ended |
|
|
|
Quarter Ended |
|
||||
|
|
|
|
|
|
|
|
||||
|
|
Results |
|
|
|
Results |
|
||||
|
|
Under |
|
|
|
Under |
|
||||
|
|
GAAP |
|
|
|
GAAP |
|
||||
|
|
|
|
|
|
|
|
||||
|
|
$ |
2.3 |
|
|
|
|
$ |
(13.0 |
) |
|
|
|
|
|
|
|
|
|
||||
|
|
|
126.3 |
|
|
|
|
|
139.4 |
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
128.6 |
|
|
|
|
|
126.4 |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
2.2 |
|
|
|
|
|
11.7 |
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
100.4 |
|
|
|
|
|
97.1 |
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
|
102.6 |
|
|
|
|
|
108.8 |
|
|
|
|
|
|
|
|
|
|
||||
Heritage Brands Wholesale |
|
|
15.0 |
|
|
|
|
|
16.8 |
|
|
|
|
|
|
|
|
|
|
||||
Corporate |
|
|
(47.4 |
) |
|
|
|
|
(41.7 |
) |
|
|
|
|
|
|
|
|
|
||||
Total earnings before interest and taxes |
|
$ |
198.8 |
|
|
|
|
$ |
210.3 |
|
|
|
|
|
|
|
|
|
|
Reconciliations of Constant Currency Revenue
(In millions)
The Company calculates constant currency revenue information by translating its foreign revenues for the relevant period into 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 |
|||||||
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
$ |
832.8 |
|
$ |
809.4 |
|
2.9 |
% |
|
(3.7 |
) % |
|
6.6 |
% |
Total |
|
|
1,124.3 |
|
|
1,070.9 |
|
5.0 |
% |
|
(3.0 |
) % |
|
8.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
613.4 |
|
|
573.1 |
|
7.0 |
% |
|
(4.4 |
) % |
|
11.4 |
% |
Total |
|
|
887.7 |
|
|
886.2 |
|
0.2 |
% |
|
(3.0 |
) % |
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Revenue |
|
$ |
2,157.9 |
|
$ |
2,122.7 |
|
1.7 |
% |
|
(2.8 |
) % |
|
4.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Direct-to-Consumer |
|
$ |
836.8 |
|
$ |
771.3 |
|
8.5 |
% |
|
(3.7 |
) % |
|
12.2 |
% |
Directly Operated Digital Commerce |
|
$ |
158.7 |
|
$ |
152.6 |
|
4.0 |
% |
|
(3.7 |
) % |
|
7.7 |
% |
Wholesale |
|
$ |
1,214.3 |
|
$ |
1,235.3 |
|
(1.7 |
) % |
|
(2.6 |
) % |
|
0.9 |
% |
Total Digital |
|
$ |
416.9 |
|
$ |
430.8 |
|
(3.2 |
) % |
|
(2.6 |
) % |
|
(0.6 |
) % |
Full Year and Quarterly Reconciliations of GAAP to Non-GAAP Amounts |
|
Reconciliations of Constant Currency Revenue Guidance |
|
|
|
|
Current Guidance |
|
Full Year 2023 (Estimated) |
|
|
GAAP revenue increase |
3% to 4% |
Positive impact of foreign exchange |
1% |
Non-GAAP revenue increase on a constant currency basis |
2% to 3% |
Please refer to the section entitled “Reconciliations of Constant Currency Revenue” on page 12 of this release for a description of the presentation of constant currency amounts.
Reconciliation of GAAP Diluted Net Income Per Common Share to Diluted Net Income Per Common Share on a Non-GAAP Basis |
||||||||||||||||||||
|
|
Full Year 2022 |
|
Second Quarter 2022 |
||||||||||||||||
|
|
(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 |
|
$ |
200.4 |
|
$ |
(393.2 |
) |
|
$ |
593.6 |
|
$ |
115.3 |
|
$ |
(24.3 |
) |
|
$ |
139.6 |
Total weighted average shares |
|
|
66.2 |
|
|
|
|
66.2 |
|
|
67.0 |
|
|
|
|
67.0 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted net income per common share |
|
$ |
3.03 |
|
|
|
$ |
8.97 |
|
$ |
1.72 |
|
|
|
$ |
2.08 |
(1) |
Represents the impact on net income in the year ended |
(2) |
Represents the impact on net income in the quarter ended |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230531005917/en/
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