Yahoo Finance PVH’s Calvin Klein: Still Strong in North America, Europe
PVH Has 1Q16 Earnings Beat: Calvin Klein Is the Show-Stopper
Calvin Klein brand overview
Calvin Klein was acquired by PVH (PVH) in 2003. In February 2013, PVH also acquired Warnaco Group, Calvin Klein’s largest licensee. It did this to get complete control of the Calvin Klein jeanswear and underwear businesses around the world. In fiscal 2015, PVH derived 36% of its total revenue and 46% of its operating income from Calvin Klein.
PVH reports its Calvin Klein (CK) business under two segments:
Calvin Klein North America
Calvin Klein International
Calvin Klein’s top line performance in fiscal 1Q16
Calvin Klein continued its solid performance in 1Q16. Its revenue increased 13% on a constant currency basis and 11% on a GAAP (generally accepted accounting principles) basis after increasing 9% on a constant currency basis in fiscal 2015.
Calvin Klein North America’s revenue increased 14% on a constant currency basis and 12% on a GAAP basis. The growth was driven by a more than 20% increase in the North America wholesale business due to strong performance in all categories, especially underwear. The retail business, however, saw some softness, primarily due to a 4% decline in comparable store sales. This was driven by a weakness in traffic and consumer spending trends in Calvin Klein’s US stores located in international tourist locations.
Calvin Klein International’s revenue had solid growth during the quarter. Sales increased 13% on a constant currency basis and 9% on a GAAP basis as a result of strong performance in Europe. The Asia business, however, was negatively impacted by the timing of the Chinese New Year. The first quarter of 2015 included the full Chinese New Year selling season, and the first quarter of 2016 included only part of the season. Calvin Klein International’s comparable store sales declined 1% as growth in Europe and China was offset by declines in Korea, Hong Kong, and Brazil.
A look at the segment’s profitability
EBIT (earnings before interest and taxes) stood at $99 million on a non-GAAP basis and $90 million on a GAAP basis in 1Q16. EBIT increased 20% on a constant currency basis due to higher revenue combined with gross margin improvement in Europe and Asia.
PVH and other apparel companies such as Coach (COH), Hanesbrands (HBI), Michael Kors (KORS), and VF Corporation (VFC) are part of the Consumer Discretionary Select Sector SPDR ETF (XLY). XLY invests 2.4% of its portfolio in these companies.
In the next part of this series, we’ll look at PVH’s Heritage Brands business.
Browse this series on Market Realist:
