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PVH Corp. (PVH) Tops Q3 EPS by 11c, Revenues Beat; Raises FY19 EPS Guidance

November 25, 2019 4:19 PM EST

PVH Corp. (NYSE: PVH) reported Q3 EPS of $3.10, $0.11 better than the analyst estimate of $2.99. Revenue for the quarter came in at $2.59 billion versus the consensus estimate of $2.54 billion.

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.”

GUIDANCE:

PVH Corp. sees Q4 2019 EPS of $1.77-$1.79, versus the consensus of $1.83.

PVH Corp. sees FY2019 EPS of $9.43-$9.45, versus the consensus of $9.39.

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.

For earnings history and earnings-related data on PVH Corp. (PVH) click here.



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