COMPANY COMPLETED $200
MILLION STOCK REPURCHASES DURING THE SECOND QUARTER, INCREASES FULL
YEAR PLANNED REPURCHASES TO UP TO $400 MILLION
- Second quarter revenue increased 4% to $2.207 billion compared
to the prior year period (increased 2% on a constant currency
basis); guidance was an increase of low single-digits
- Second quarter EPS
- GAAP basis: $1.50 compared to guidance of approximately $1.70.
Results include pre-tax costs of $39 million, or $0.48 per share,
not known at time of guidance, related to actions taken in July
2023 in conjunction with the Company’s plan to reduce people costs
in its global offices.
- Non-GAAP basis: $1.98 exceeded guidance of approximately
$1.70
- Full year outlook
- Revenue: Reaffirms projected increase of 3% to 4% (increase 2%
to 3% on a constant currency basis)
- EPS:
- GAAP basis: Approximately $9.60 compared to approximately
$10.00 previously
- Non-GAAP basis: Approximately $10.35 compared to approximately
$10.00 previously
PVH Corp. [NYSE: PVH] today reported its 2023
second quarter results and updated its full year outlook.
Stefan Larsson, Chief Executive Officer, commented, “We
delivered another strong quarter across both Calvin Klein and TOMMY
HILFIGER driven by the disciplined execution of our long-term,
brand-building growth plan, the PVH+ Plan. We generated
double-digit revenue growth in our direct-to-consumer business in
both our stores and in e-commerce, through our relentless focus on
building brand desirability through product, consumer engagement
and marketplace execution.”
Mr. Larsson added, “We are increasing our EPS outlook for the
year, excluding restructuring charges, based on the confidence we
have in our ability to execute in the back half of the year, while
continuing to successfully navigate the macroeconomic environment.
As we lean into the five key growth drivers of the PVH+ Plan, we’re
continuing to gain traction by connecting our consumer-facing
execution with an increasingly demand-driven operating engine to
fuel long-term profitable growth.”
Zac Coughlin, Chief Financial Officer, said, “We drove another
quarter of strong performance, and excluding restructuring charges,
have raised our full year EPS outlook, while continuing to project
a double-digit EBIT margin, underscoring the conviction we have in
our ability to drive improved profitability. In addition,
reflecting the confidence that we have in our ability to deliver
sustainable long-term growth, we have increased our share
repurchases. We now expect to repurchase up to $400 million of
stock in 2023, having repurchased $200 million of stock in just the
second quarter. We are well-positioned to achieve strong EPS growth
in 2023 and generate significant and increasing cash flow to create
value for shareholders.”
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.
Second Quarter Review:
- Revenue increased 4% compared to the prior year period
(increased 2% on a constant currency basis) driven by growth in
both the Tommy Hilfiger and Calvin Klein businesses. The increase
included solid performance in the Company’s international
businesses, particularly in the Asia Pacific region, including over
20% growth in local currency in China reflecting continued recovery
after the lifting of COVID restrictions in the fourth quarter of
2022, and continued growth in Europe in euros. The increase also
reflected continued growth in the North America direct-to-consumer
business.
- Direct-to-consumer revenue increased 11% compared to the
prior year period (increased 10% on a constant currency basis),
with growth in both the Company’s owned and operated stores and
owned and operated digital commerce business in all regions.
- Wholesale revenue decreased 3% compared to the prior
year period (decreased 6% on a constant currency basis) as
wholesale customers continue to take a cautious approach.
- Owned and operated digital commerce revenue increased 12%
compared to the prior year period (increased 11% on a constant
currency basis). The strong growth in the Company’s digital
commerce business was more than offset by a decrease in wholesale
sales to traditional retailers’ ecommerce businesses and pure
players, resulting in a 10% decrease in total digital
revenue compared to the prior year period (decreased 12% on a
constant currency basis). Total digital penetration as a percentage
of total revenue was approximately 20%.
- Gross margin was 57.6% compared to 57.2% in the prior
year period. The increase reflects benefits from a favorable shift
in regional and channel mix, lower freight costs, and price
increases, partially offset by higher product costs, including an
approximately 120 basis point negative impact on inventory costs
due to foreign currency exchange rates.
- Inventory increased 6% compared to the prior year
period. The 6% increase is in line with projected sales growth and
reflects a sequential improvement as compared to the 24%
year-over-year increase in the first quarter of 2023.
Second Quarter Consolidated Results:
- Revenue increased 4% to $2.207 billion compared to the
prior year period (increased 2% on a constant currency basis).
- Tommy Hilfiger revenue increased 6% compared to the
prior year period (increased 3% on a constant currency basis).
- Tommy Hilfiger International revenue increased 6%
(increased 3% on a constant currency basis).
- Tommy Hilfiger North America revenue increased 4%.
- Calvin Klein revenue increased 3% compared to the prior
year period (increased 2% on a constant currency basis)
- Calvin Klein International revenue increased 11%
(increased 9% on a constant currency basis).
- Calvin Klein North America revenue decreased 9%
primarily driven by a decrease in the wholesale business.
- Heritage Brands revenue decreased 11% compared to the
prior year period.
- Earnings before interest and taxes (“EBIT”) on a GAAP
basis was $143 million, inclusive of a $5 million positive impact
due to foreign currency translation, compared to $177 million in
the prior year period. EBIT on a GAAP basis included costs of $39
million in the current quarter and net costs of $34 million in the
prior year period described under the heading “Non-GAAP Exclusions”
later in this release. EBIT on a non-GAAP basis for these periods
excludes these amounts. EBIT on a non-GAAP basis was $182 million,
inclusive of a $5 million positive impact due to foreign currency
translation, compared to $211 million in the prior year period. The
revenue increase discussed above was more than offset by (i) the
approximately 120 basis point negative impact on inventory costs
due to foreign currency exchange rates, discussed above and (ii)
overall higher expenses driven by a planned increase in investments
to drive the Company’s strategic initiatives, including an increase
in marketing, compared to the prior year period. The Company
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”)
- GAAP basis: $1.50 compared to $1.72 in the prior year
period.
- Non-GAAP basis: $1.98 compared to $2.08 in the prior
year period.
EPS on both a GAAP and a non-GAAP basis for
the second quarter of 2023 includes the positive impact of $0.05
per share related to foreign currency translation.
EPS on a GAAP basis for these periods also
included the amounts for the applicable period described under the
heading “Non-GAAP Exclusions” later in this release. EPS on a
non-GAAP basis for these periods excluded these amounts.
- Interest expense increased to $24 million from $20
million in the prior year period primarily due to higher interest
rates.
- Effective tax rate was 21.3% on a GAAP basis as compared
to 26.4% in the prior year period. The effective tax rate was 21.6%
on a non-GAAP basis as compared to 26.9% in the prior year
period.
Stock Repurchase Program: Delivering on its commitment
under the PVH+ Plan to return excess cash to stockholders, the
Company repurchased 2.4 million shares of its common stock for $200
million during the second quarter of 2023.
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).
- EPS on a GAAP basis is projected to be approximately
$9.60 compared to $3.03 in 2022. EPS on a non-GAAP basis, which
excludes restructuring charges, is projected to be approximately
$10.35. EPS on a non-GAAP basis was $8.97 in 2022. The 2023 EPS
projections on both a GAAP and a non-GAAP basis include the
estimated positive impact of approximately $0.15 per share related
to foreign currency translation. EPS on a GAAP basis for these
periods also include the amounts described under the heading
“Non-GAAP Exclusions” later in this release. EPS on a non-GAAP
basis exclude 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
22%.
Third Quarter 2023 Guidance
- Revenue is projected to increase mid-single digits as
compared to the third quarter of 2022 (increase low-single digits
on a constant currency basis).
- EPS on a GAAP basis is projected to be approximately
$2.43 compared to $(2.88) in the prior year period. EPS on a
non-GAAP basis, which excludes restructuring charges, is projected
to be approximately $2.70. EPS on a non-GAAP basis was $2.60 in the
prior year period. The third quarter 2023 EPS projections include
the estimated positive impact of approximately $0.15 per share
related to foreign currency translation. EPS on a GAAP basis for
these periods also include the amounts described under the heading
“Non-GAAP Exclusions” later in this release. EPS on a non-GAAP
basis exclude these amounts.
- Interest expense is projected to increase to
approximately $25 million compared to $19 million in the third
quarter of 2022 primarily due to higher interest rates.
- Effective tax rate is projected to be approximately
22%.
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 restructuring costs of approximately $60 million
incurred and expected to be incurred in 2023 consisting principally
of severance related to actions taken in July 2023 and expected to
be taken in the third quarter of 2023 under the plans initially
announced in August 2022 to reduce people costs in the Company’s
global offices by approximately 10% by the end of 2023, of which
$39 million was incurred in the second quarter and approximately
$21 million is expected to be incurred in the third quarter.
- 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 restructuring costs of $20 million incurred in 2022,
consisting principally of severance related to initial actions
under the plans announced in August 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 its Russia 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
in Karl 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 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 and can have a
significant impact on the Company’s reported revenues. The Company
calculates constant currency revenue information by translating its
foreign revenues for the relevant 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 relevant period).
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 tables 1 through 5 and 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 second quarter earnings release on
Wednesday, August 30, 2023 at 9:00 a.m. EDT. Please log on
to the Company’s website at www.PVH.com and go to the Events
page 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. Please log on to www.PVH.com as described
above to listen to the replay. 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, 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
August 2022, and the August 2021 sale of assets of, and exit from,
its Heritage Brands business to focus on its Calvin Klein and Tommy
Hilfiger businesses; (iii) the ability to realize the intended
benefits from the acquisition of licensees or the reversion of
licensed rights (such as the announced plan to bring in-house most
of the product categories currently licensed to G-III Apparel
Group, Ltd. upon the expirations over time of the underlying
license agreements) and avoid any disruptions in the businesses
during the transition from operation by the licensee to the direct
operation by us; (iv) the Company has significant levels of
outstanding debt and borrowing capacity 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;
(v) the levels of sales of the Company’s apparel, footwear and
related products, both to its wholesale customers and in its retail
stores and its directly operated digital commerce sites, 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 (including inflationary pressures like those
currently being seen globally), fuel prices, reductions in travel,
fashion trends, consolidations, repositionings and bankruptcies in
the retail industries, consumer sentiment and other factors; (vi)
the Company’s ability to manage its growth and inventory; (vii)
quota restrictions, the imposition of safeguard controls and the
imposition of new or increased duties or tariffs on goods from the
countries where the Company or its licensees produce goods under
its trademarks, 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; (viii) the availability and cost of raw materials;
(ix) 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); (x) the regulation or prohibition of the transaction of
business with specific individuals or entities and their affiliates
or goods manufactured in (or containing raw materials or components
from) certain regions, such as the listing of a person or entity as
a Specially Designated National or Blocked Person by the U.S.
Department of the Treasury’s Office of Foreign Assets Control and
the issuance of Withhold Release Orders by the U.S. Customs and
Border Protection; (xi) changes in available factory and shipping
capacity, wage and shipping cost escalation, and store closures in
any of the countries where the Company’s or its licensees’ or
wholesale customers’ or other business partners’ stores are located
or products are sold or produced or are planned to be sold or
produced, as a result of civil conflict, war or terrorist acts, the
threat of any of the foregoing, or political or labor instability,
such as the current war in Ukraine that led to the Company’s exit
from its retail business in Russia and the cessation of its
wholesale operations in Russia and Belarus, and the temporary
cessation of business by many of its business partners in Ukraine;
(xii) disease epidemics and health-related concerns, such as the
recent COVID-19 pandemic, which could result in (and, in the case
of the COVID-19 pandemic, did result in some of the following)
supply-chain disruptions due to closed factories, reduced
workforces and production capacity, shipping delays, container and
trucker shortages, port congestion and other logistics problems,
closed stores, and reduced consumer traffic and purchasing, or
governments implement mandatory business closures, travel
restrictions or the like, and market or other changes that could
result in shortages of inventory available to be delivered to the
Company’s stores and customers, order cancellations and lost sales,
as well as in noncash impairments of the Company’s goodwill and
other intangible assets, operating lease right-of-use assets, and
property, plant and equipment; (xiii) actions taken towards
sustainability and social and environmental responsibility as part
of the Company’s sustainability and social and environmental
strategy may not be achieved or may be perceived to be falsely
claimed, which could diminish consumer trust in the Company’s
brands, as well as the Company’s brands’ value; (xiv) 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; (xv) significant fluctuations of the U.S.
dollar against foreign currencies in which the Company transacts
significant levels of business; (xvi) 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; (xvii)
the impact of new and revised tax legislation and regulations; and
(xviii) 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 following this
Safe Harbor Statement, 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 Statements of
Operations (In millions, except per share data)
Quarter Ended
Six Months Ended
7/30/23
7/31/22
7/30/23
7/31/22
Net sales
$
2,105.2
$
2,031.1
$
4,156.3
$
4,037.7
Royalty revenue
80.1
78.3
164.8
168.3
Advertising and other revenue
21.7
22.6
43.8
48.7
Total revenue
$
2,207.0
$
2,132.0
$
4,364.9
$
4,254.7
Gross profit
$
1,272.3
$
1,219.5
$
2,522.6
$
2,458.2
Selling, general and administrative
expenses
1,138.5
1,070.4
2,202.5
2,109.8
Non-service related pension and
postretirement income
0.3
3.2
0.9
6.8
Equity in net income of unconsolidated
affiliates
9.2
24.7
21.1
32.1
Earnings before interest and taxes
143.3
177.0
342.1
387.3
Interest expense, net
23.6
20.3
45.6
42.1
Pre-tax income
119.7
156.7
296.5
345.2
Income tax expense
25.5
41.4
66.3
96.8
Net income
$
94.2
$
115.3
$
230.2
$
248.4
Diluted net income per common share
(1)
$
1.50
$
1.72
$
3.65
$
3.66
Quarter Ended
Six Months Ended
7/30/23
7/31/22
7/30/23
7/31/22
Depreciation and amortization expense
$
75.5
$
75.4
$
147.8
$
152.2
Please see following pages for information related to non-GAAP
measures discussed in this release.
(1)
Please see Note A in Notes to Consolidated
GAAP Statements of Operations 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 July 30, 2023 and July 31, 2022 on a
non-GAAP basis by excluding (i) the restructuring costs incurred in
the second quarter of 2023 related to actions taken in July 2023
under the plans initially announced in August 2022 to reduce people
costs in the Company’s global offices by approximately 10% by the
end of 2023 (the “2022 cost savings initiative”), consisting
principally of severance; (ii) the costs incurred in the second
quarter of 2022 in connection with the Company’s decision to exit
from its retail business in Russia and the cessation of its
wholesale operations in Russia and Belarus (the “Russia business
exit”), consisting of noncash asset impairments, contract
termination and other costs, and severance; (iii) the gain recorded
in the second quarter of 2022 in connection with the sale of the
Company’s equity investment in Karl Lagerfeld Holding B.V. (the
“Karl Lagerfeld transaction”); and (iv) 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 the results being reported 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.
The following table presents the non-GAAP measures that are
discussed in this release. Please see Tables 1 through 5 for the
reconciliations of the GAAP amounts to amounts on a non-GAAP
basis.
Quarter Ended
Six Months Ended
7/30/23
7/31/22
7/30/23
7/31/22
Non-GAAP Measures
Selling, general and administrative
expenses (1)
$
1,099.5
$
1,019.9
$
2,163.5
$
2,059.3
Equity in net income of unconsolidated
affiliates (2)
8.6
16.0
Earnings before interest and taxes (3)
182.3
211.4
381.1
421.7
Income tax expense (4)
34.3
51.5
75.1
106.9
Net income (5)
124.4
139.6
260.4
272.7
Diluted net income per common share
(6)
$
1.98
$
2.08
$
4.13
$
4.02
(1)
Please see Table 3 for the reconciliations
of GAAP selling, general and administrative (“SG&A”) expenses
to SG&A expenses on a non-GAAP basis.
(2)
Please see Table 4 for the reconciliations
of GAAP equity in net income of unconsolidated affiliates to equity
in net income of unconsolidated affiliates on a non-GAAP basis.
(3)
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.
(4)
Please see Table 5 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.
(5)
Please see Table 1 for the reconciliations
of GAAP net income to net income on a non-GAAP basis.
(6)
Please see Note A in Notes to Consolidated
GAAP Statements of Operations 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. 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
Six Months Ended
7/30/23
7/31/22
7/30/23
7/31/22
Net income
$
94.2
$
115.3
$
230.2
$
248.4
Diluted net income per common share
(1)
$
1.50
$
1.72
$
3.65
$
3.66
Pre-tax items excluded:
SG&A expenses associated with the
Russia business exit
50.5
50.5
SG&A expenses associated with the 2022
cost savings initiative
39.0
39.0
Gain in connection with the Karl Lagerfeld
transaction (recorded in equity in net income of unconsolidated
affiliates)
(16.1
)
(16.1
)
Tax effects of the pre-tax items above
(2)
(8.8
)
(10.1
)
(8.8
)
(10.1
)
Net income on a non-GAAP basis
$
124.4
$
139.6
$
260.4
$
272.7
Diluted net income per common share on a
non-GAAP basis (1)
$
1.98
$
2.08
$
4.13
$
4.02
(1)
Please see Note A in Notes to the
Consolidated GAAP Statements of Operations 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 5 for an explanation of
the calculation of the tax effects of the above items.
Table 2 - Reconciliations of GAAP earnings
before interest and taxes to earnings before interest and taxes on
a non-GAAP basis
Quarter Ended
Six Months Ended
7/30/23
7/31/22
7/30/23
7/31/22
Earnings before interest and taxes
$
143.3
$
177.0
$
342.1
$
387.3
Items excluded:
SG&A expenses associated with the
Russia business exit
50.5
50.5
SG&A expenses associated with the 2022
cost savings initiative
39.0
39.0
Gain in connection with the Karl Lagerfeld
transaction (recorded in equity in net income of unconsolidated
affiliates)
(16.1
)
(16.1
)
Earnings before interest and taxes on a
non-GAAP basis
$
182.3
$
211.4
$
381.1
$
421.7
Table 3 -
Reconciliations of GAAP SG&A expenses to SG&A expenses on a
non-GAAP basis
Quarter Ended
Six Months Ended
7/30/23
7/31/22
7/30/23
7/31/22
SG&A expenses
$
1,138.5
$
1,070.4
$
2,202.5
$
2,109.8
Items excluded:
Expenses associated with the Russia
business exit
(50.5
)
(50.5
)
Expenses associated with the 2022 cost
savings initiative
(39.0
)
(39.0
)
SG&A expenses on a non-GAAP basis
$
1,099.5
$
1,019.9
$
2,163.5
$
2,059.3
PVH CORP. Reconciliations of GAAP to Non-GAAP Amounts
(continued) (In millions, except per share data)
Table 4 -
Reconciliations of GAAP equity in net income of unconsolidated
affiliates to equity in net income of unconsolidated affiliates on
a non-GAAP basis
Quarter Ended
Six Months Ended
7/31/22
7/31/22
Equity in net income of unconsolidated
affiliates
$
24.7
$
32.1
Item excluded:
Gain in connection with the Karl Lagerfeld
transaction
(16.1
)
(16.1
)
Equity in net income of unconsolidated
affiliates on a non-GAAP basis
$
8.6
$
16.0
Table 5 -
Reconciliations of GAAP income tax expense to income tax expense on
a non-GAAP basis
Quarter Ended
Six Months Ended
7/30/23
7/31/22
7/30/23
7/31/22
Income tax expense
$
25.5
$
41.4
$
66.3
$
96.8
Item excluded:
Tax effects of pre-tax items identified as
non-GAAP exclusions (1)
8.8
10.1
8.8
10.1
Income tax expense on a non-GAAP basis
$
34.3
$
51.5
$
75.1
$
106.9
(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 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.
PVH CORP. 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
7/30/23
7/31/22
GAAP
Non-GAAP
GAAP
Non-GAAP
Results
Adjustments (1)
Results
Results
Adjustments (2)
Results
Net income
$ 94.2
$ (30.2)
$ 124.4
$ 115.3
$ (24.3)
$ 139.6
Weighted average common shares
62.1
62.1
66.6
66.6
Weighted average dilutive securities
0.6
0.6
0.4
0.4
Total shares
62.7
62.7
67.0
67.0
Diluted net income per common share
$ 1.50
$ 1.98
$ 1.72
$ 2.08
Six Months Ended
Six Months Ended
7/30/23
7/31/22
GAAP
Non-GAAP
GAAP
Non-GAAP
Results
Adjustments (1)
Results
Results
Adjustments (2)
Results
Net income
$ 230.2
$ (30.2)
$ 260.4
$ 248.4
$ (24.3)
$ 272.7
Weighted average common shares
62.4
62.4
67.3
67.3
Weighted average dilutive securities
0.7
0.7
0.6
0.6
Total shares
63.1
63.1
67.9
67.9
Diluted net income per common share
$ 3.65
$ 4.13
$ 3.66
$ 4.02
(1)
Represents the impact on net income in the
periods ended July 30, 2023 from the elimination of (i) the
restructuring costs related to the 2022 cost savings initiative;
and (ii) the tax effects associated with the foregoing pre-tax
item. Please see Table 1 for the reconciliations of GAAP net income
to net income on a non-GAAP basis.
(2)
Represents the impact on net income in the
periods ended July 31, 2022 from the elimination of (i) the costs
related to the Russia business exit; (ii) the gain recorded in
connection with the Karl Lagerfeld transaction; and (iii) the tax
effects associated with the foregoing pre-tax items. Please see
Table 1 for the reconciliations of GAAP net income to net income on
a non-GAAP basis.
PVH CORP. Consolidated Balance Sheets (In
millions)
7/30/23
7/31/22
ASSETS
Current Assets:
Cash and Cash Equivalents
$ 372.8
$ 699.3
Receivables
910.0
837.5
Inventories
1,795.5
1,689.9
Other
335.8
357.7
Total Current Assets
3,414.1
3,584.4
Property, Plant and Equipment
876.0
842.0
Operating Lease Right-of-Use Assets
1,291.2
1,230.3
Goodwill and Other Intangible Assets
5,586.5
5,897.5
Other Assets
374.6
368.1
TOTAL ASSETS
$ 11,542.4
$ 11,922.3
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts Payable and Accrued Expenses
$ 2,090.9
$ 2,257.9
Current Portion of Operating Lease
Liabilities
328.6
348.2
Short-Term Borrowings
15.2
12.2
Current Portion of Long-Term Debt
688.9
38.2
Other Liabilities
624.7
789.7
Long-Term Portion of Operating Lease
Liabilities
1,136.9
1,114.2
Long-Term Debt
1,619.6
2,155.5
Stockholders’ Equity
5,037.6
5,206.4
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY
$ 11,542.4
$ 11,922.3
Note: Year over year balances are impacted
by changes in foreign currency exchange rates.
PVH CORP. Segment Data (In millions)
REVENUE BY
SEGMENT
Quarter Ended
Quarter Ended
7/30/23
7/31/22
Tommy Hilfiger North
America
Net sales
$
297.6
$
288.2
Royalty revenue
18.5
17.1
Advertising and other revenue
4.3
4.2
Total
320.4
309.5
Tommy Hilfiger
International
Net sales
800.2
749.5
Royalty revenue
13.9
14.9
Advertising and other revenue
4.7
4.6
Total
818.8
769.0
Total Tommy
Hilfiger
Net sales
1,097.8
1,037.7
Royalty revenue
32.4
32.0
Advertising and other revenue
9.0
8.8
Total
1,139.2
1,078.5
Calvin Klein North
America
Net sales
269.9
301.0
Royalty revenue
34.4
34.2
Advertising and other revenue
10.5
11.5
Total
314.8
346.7
Calvin Klein
International
Net sales
610.3
549.2
Royalty revenue
13.0
11.9
Advertising and other revenue
2.1
2.2
Total
625.4
563.3
Total Calvin
Klein
Net sales
880.2
850.2
Royalty revenue
47.4
46.1
Advertising and other revenue
12.6
13.7
Total
940.2
910.0
Heritage Brands
Wholesale
Net sales
127.2
143.2
Royalty revenue
0.3
0.2
Advertising and other revenue
0.1
0.1
Total
127.6
143.5
Total
Revenue
Net sales
2,105.2
2,031.1
Royalty revenue
80.1
78.3
Advertising and other revenue
21.7
22.6
Total
$
2,207.0
$
2,132.0
PVH CORP. Segment Data (continued) (In millions)
EARNINGS BEFORE
INTEREST AND TAXES BY SEGMENT
Quarter Ended
Quarter Ended
7/30/23
7/31/22
Results
Results
Under
Non-GAAP
Under
Non-GAAP
GAAP
Adjustments (1)
Results
GAAP
Adjustments (2)
Results
Tommy Hilfiger North America
$
13.2
$
(6.4
)
$
19.6
$
(1.9
)
$
(1.9
)
Tommy Hilfiger International
73.4
(12.3
)
85.7
88.5
$
(36.7
)
125.2
Total Tommy Hilfiger
86.6
(18.7
)
105.3
86.6
(36.7
)
123.3
Calvin Klein North America
20.4
(5.9
)
26.3
21.9
21.9
Calvin Klein International
80.2
(8.5
)
88.7
78.4
(13.8
)
92.2
Total Calvin Klein
100.6
(14.4
)
115.0
100.3
(13.8
)
114.1
Heritage Brands Wholesale
2.6
(4.6
)
7.2
13.4
13.4
Corporate
(46.5
)
(1.3
)
(45.2
)
(23.3
)
16.1
(39.4
)
Total earnings before interest and
taxes
$
143.3
$
(39.0
)
$
182.3
$
177.0
$
(34.4
)
$
211.4
(1)
The adjustments for the quarter ended July
30, 2023 represent the elimination of the restructuring costs
related to the 2022 cost savings initiative.
(2)
The adjustments for the quarter ended July
31, 2022 represent the elimination of (i) the costs related to the
Russia business exit; and (ii) the gain recorded in connection with
the Karl Lagerfeld transaction.
PVH CORP. Segment Data (continued) (In millions)
REVENUE BY
SEGMENT
Six Months Ended
Six Months
Ended
7/30/23
7/31/22
Tommy Hilfiger North
America
Net sales
$
564.3
$
523.7
Royalty revenue
38.8
37.9
Advertising and other revenue
8.8
9.4
Total
611.9
571.0
Tommy Hilfiger
International
Net sales
1,613.0
1,539.8
Royalty revenue
29.6
29.4
Advertising and other revenue
9.0
9.2
Total
1,651.6
1,578.4
Total Tommy
Hilfiger
Net sales
2,177.3
2,063.5
Royalty revenue
68.4
67.3
Advertising and other revenue
17.8
18.6
Total
2,263.5
2,149.4
Calvin Klein North
America
Net sales
497.6
557.9
Royalty revenue
70.1
76.4
Advertising and other revenue
21.4
25.5
Total
589.1
659.8
Calvin Klein
International
Net sales
1,208.6
1,107.8
Royalty revenue
25.8
24.2
Advertising and other revenue
4.4
4.4
Total
1,238.8
1,136.4
Total Calvin
Klein
Net sales
1,706.2
1,665.7
Royalty revenue
95.9
100.6
Advertising and other revenue
25.8
29.9
Total
1,827.9
1,796.2
Heritage Brands
Wholesale
Net sales
272.8
308.5
Royalty revenue
0.5
0.4
Advertising and other revenue
0.2
0.2
Total
273.5
309.1
Total
Revenue
Net sales
4,156.3
4,037.7
Royalty revenue
164.8
168.3
Advertising and other revenue
43.8
48.7
Total
$
4,364.9
$
4,254.7
PVH CORP. Segment Data (continued) (In millions)
EARNINGS BEFORE
INTEREST AND TAXES BY SEGMENT
Six Months Ended
Six Months Ended
7/30/23
7/31/22
Results
Results
Under
Non-GAAP
Under
Non-GAAP
GAAP
Adjustments (1)
Results
GAAP
Adjustments (2)
Results
Tommy Hilfiger North America
$ 15.5
$ (6.4)
$ 21.9
$ (14.9)
$ (14.9)
Tommy Hilfiger International
199.7
(12.3)
212.0
227.9
$ (36.7)
264.6
Total Tommy Hilfiger
215.2
(18.7)
233.9
213.0
(36.7)
249.7
Calvin Klein North America
22.6
(5.9)
28.5
33.6
33.6
Calvin Klein International
180.6
(8.5)
189.1
175.5
(13.8)
189.3
Total Calvin Klein
203.2
(14.4)
217.6
209.1
(13.8)
222.9
Heritage Brands Wholesale
17.6
(4.6)
22.2
30.2
30.2
Corporate
(93.9)
(1.3)
(92.6)
(65.0)
16.1
(81.1)
Total earnings before interest and
taxes
$ 342.1
$ (39.0)
$ 381.1
$ 387.3
$ (34.4)
$ 421.7
(1)
The adjustments for the six months ended
July 30, 2023 represent the elimination of the restructuring costs
related to the 2022 cost savings initiative.
(2)
The adjustments for the six months ended
July 31, 2022 represent the elimination of (i) the costs related to
the Russia business exit; and (ii) the gain recorded in connection
with the Karl Lagerfeld transaction.
PVH CORP. Reconciliations of 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 and 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
impact 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 relevant 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 relevant 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
Positive Impact of Foreign
Exchange
Constant Currency
7/30/23
7/31/22
Tommy Hilfiger International
$
818.8
$
769.0
6.5
%
3.3
%
3.2
%
Total Tommy Hilfiger
1,139.2
1,078.5
5.6
%
2.1
%
3.5
%
Calvin Klein International
625.4
563.3
11.0
%
2.0
%
9.0
%
Total Calvin Klein
940.2
910.0
3.3
%
1.1
%
2.2
%
Total Revenue
$
2,207.0
$
2,132.0
3.5
%
1.5
%
2.0
%
Total Direct-to-Consumer
$
1,065.3
$
957.3
11.3
%
0.8
%
10.5
%
Directly Operated Digital Commerce
$
193.1
$
172.8
11.7
%
0.6
%
11.1
%
Wholesale
$
1,039.9
$
1,073.8
(3.2
)%
2.3
%
(5.5
)%
Total Digital
$
455.5
$
506.5
(10.1
)%
2.2
%
(12.3
)%
PVH CORP. Full Year and Quarterly Reconciliations of
GAAP to Non-GAAP Amounts
The Company is presenting its 2023 estimated results on a
non-GAAP basis by excluding (i) the restructuring costs incurred
and expected to be incurred related to the 2022 cost savings
initiative, consisting principally of severance and (ii) the
estimated tax effects associated with the foregoing pre-tax item.
The Company has provided the reconciliations set forth below to
present its estimates on a GAAP basis and excluding the foregoing
amounts.
The 2023 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 the results being reported 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 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 effect associated with the above pre-tax item
is based on the Company’s assessment of deductibility. In making
this assessment, the Company evaluated and concluded that the
pre-tax item identified above as a non-GAAP exclusion is tax
deductible, with the tax effect taken at the applicable statutory
income tax rates of the local jurisdictions.
2023 Net Income
Per Common Share Reconciliations
Current Guidance
Full Year 2023 (Estimated)
Third Quarter 2023
(Estimated)
GAAP net income per common share
Approximately $9.60
Approximately $2.43
Estimated per common share impact of item
identified as non-GAAP exclusion
$(0.75)
$(0.27)
Net income per common share on a Non-GAAP
basis
Approximately $10.35
Approximately $2.70
The GAAP net income per common share 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, such as the 2022
cost savings initiative, 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,
including the recent volatility in the financial markets, (iv)
changes in the expected impacts of inflationary pressures, as well
as unexpected additional impacts of the war in Ukraine and its
broader macroeconomic implications, 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.
PVH CORP. Full Year and Quarterly Reconciliations of
GAAP to Non-GAAP Amounts (continued)
Reconciliation of
2023 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 17 of this release for a
description of the presentation of constant currency amounts.
Reconciliation of
GAAP Diluted Net Income (Loss) Per Common Share to Diluted Net
Income Per Common Share on a Non-GAAP Basis
Full Year 2022
Third 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 (loss)
$
200.4
$
(393.2
)
$
593.6
$
(186.7
)
$
(356.2
)
$
169.5
Total weighted average shares
66.2
66.2
64.8
0.3
65.1
Diluted net income (loss) per common share
(3)
$
3.03
$
8.97
$
(2.88
)
$
2.60
(1)
Represents the impact on net income in the
year ended January 29, 2023 from the elimination of (i) a $78.4
million recognized actuarial gain on retirement plans in the fourth
quarter of 2022, (ii) $43.0 million of net costs incurred in
connection with the Russia business exit, consisting of noncash
asset impairments, contract termination and other costs, and
severance recorded in the second quarter of 2022, partially offset
by a gain on contract terminations recorded in the fourth quarter
of 2022; (iii) a $16.1 million gain recorded in the second quarter
of 2022 in connection with the Karl Lagerfeld transaction; (iv) a
$417.1 million noncash goodwill impairment charge recorded in the
third quarter of 2022, which was non-operational and driven by a
significant increase in discount rates; (v) $20.2 million of
restructuring costs incurred in the third and fourth quarters of
2022 related to the 2022 cost savings initiative; and (vi) a $7.4
million net tax expense associated with the foregoing pre-tax
items.
(2)
Represents the impact on net (loss) income
in the quarter ended October 30, 2022 from the elimination of (i) a
$417.1 million noncash goodwill impairment charge, which was
non-operational and driven by a significant increase in discount
rates; (ii) $16.7 million of restructuring costs incurred related
to the 2022 cost savings initiative; and (iii) a $77.6 million tax
benefit associated with the foregoing pre-tax items.
(3)
GAAP diluted net loss per common share for
the period ended October 30, 2022 excluded all potentially dilutive
securities because there was a net loss for the period and, as
such, the inclusion of these securities would have been
anti-dilutive.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230829339641/en/
Investors: Sheryl Freeman (212) 381-3980
investorrelations@pvh.com
Media: communications@pvh.com
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