PVH Corp. Logs $182 Million Profit; Raises Outlook for the Year

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Stefan Larsson is finding his groove at the head of PVH Corp.

The group — parent to the Calvin Klein and Tommy Hilfiger brands, in addition to smaller innerwear brands True & Co., Warner’s and Olga — reported quarterly earnings Tuesday after the market closed, improving on top and bottom lines and raising its full-year guidance despite continued uncertainty surrounding the pandemic.

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Pieces from the Tommy Hilfiger x Romeo Hunte collaboration. - Credit: Courtesy Photo
Pieces from the Tommy Hilfiger x Romeo Hunte collaboration. - Credit: Courtesy Photo

Courtesy Photo

“There will continue to be COVID-19 disruptions from a market and supply chain perspective,” Larsson, chief executive officer of PVH, told WWD in an exclusive interview. “But even with those disruptions, we are [raising] the guidance up because of the strength in the underlying business and we are confident in our ability to execute our accelerated recovery priorities in a really disciplined way.”

The firm’s quarter included total company revenues for the three-month period ending Aug. 1 of $2.3 billion, up from $1.58 billion a year ago. That’s a 46 percent increase compared with 2020’s second quarter.

At Tommy Hilfiger, total revenues rose 41 percent to $1.13 billion, up from $803 million the same time last year, including a 40 percent increase in revenues at Tommy Hilfiger international and a 45 percent jump in Hilfiger’s North American revenues.

Total revenues at the firm’s other big brand, Calvin Klein, rose 56 percent during the same time period to $922 million, compared with $590 million a year ago. Growth included a 47 percent increase in the international business and a 75 percent spike in Calvin Klein’s North America division.

Revenues in the Heritage Brands business — which was recently sold to Authentic Brands Group for $220 million increased 37 percent to $255 million, up from $186 million last year.

Designer Heron Preston in pieces from the Calvin Klein x Heron Preston collaboration. - Credit: Courtesy Photo
Designer Heron Preston in pieces from the Calvin Klein x Heron Preston collaboration. - Credit: Courtesy Photo

Courtesy Photo

Other tailwinds included the wholesale division, which surged 77 percent during the quarter, year-over-year, driven by strength in Europe, while total revenues in the digital channel, which includes owned-and-operated e-commerce as well as third-party retailers’ e-commerce websites, grew 35 percent, year-over-year. Total direct-to-consumer revenues for the second quarter rose 19 percent, compared with 2020’s second quarter.

Larsson said PVH’s owned-and-operated digital commerce was flat, compared with the prior year, only because of the enormous spike in online shopping caused by the store closures during the height of the pandemic. He added that overall, the digital channel is still growing.

“Increasingly, when markets open up, we see that the consumer wants to shop across channels. Digitally led, but across channels,” said Larsson, adding that the company continues to see strength in essentials, such as underwear, T-shirts and activewear, while the demand for more structured apparel, such as denim and dresses, increases.

“It’s all rooted in a casual lifestyle,” he said. “But more reflecting that consumers are able to go out again and socialize again.”

The company logged nearly $182 million in profits during the quarter as a result, compared with losses of $51.7 million last year.

Looks from Tommy Hilfiger pre-fall 2021. - Credit: Courtesy Photo
Looks from Tommy Hilfiger pre-fall 2021. - Credit: Courtesy Photo

Courtesy Photo

“We increased our focus on Calvin and Tommy,” added the CEO, who took the reins from Manny Chirico in February. “We built on the strength in the international business; we had exceptional performance in Europe. We continued to drive strength in e-commerce, which is currently 25 percent of our business overall and that’s doubled since the pre-pandemic. And then we delivered strength in our product across all brands, all regions. Our hero product focus that we have had drove demand growth with the consumer at a higher price, at a higher [average unit retail] and higher gross margin rate.”

As a result, PVH is raising its full 2021 fiscal-year earnings per share outlook on a non-GAAP basis from the previous outlook of $6.50 apiece to $8.50 each. The company said revenues and earnings might be impacted by the pandemic in the back half of the year, particularly in the North American business, which remains challenged with a near standstill in international travel. Still, the company expects revenues in the third quarter to increase 11 to 13 percent, compared with 2020’s third quarter. For the full year, PVH is anticipating revenues will increase by 26 to 28 percent, compared with 2020.

Headwinds include continued COVID-19 restrictions, pressures along the supply chain and a reduction of about 2 percent in total revenues for the year because of the recent sale of the Heritage Brands business — which includes the Van Heusen, Izod, Arrow and Geoffrey Beene brands — as well as store closures, particularly in parts of Asia, and the North American business.

“Each region is in a different phase of recovery,” Larsson said. “In North America, we are being most negatively impacted by the lack of tourism. In a normal year, we have 30 to 40 percent of the business driven by tourism. That’s temporarily down. Almost all gone. It will come back. But in the meantime, what we’re working on is increasing our focus on the domestic consumer. And we see some green shoots there in product strength, pricing power and e-commerce growth. But we have the most work to do in North America, relative to Europe and Asia.

“Even though we are facing that and we faced that in the second quarter through our accelerated recovery focus and the strong execution of those priorities, we were able to drive such a strong quarter,” he continued. “We are confident in our ability to continue to move PVH even closer to where the consumer is going and drive performance.”

PVH leases and operates more than 1,700 brick-and-mortar retail locations in North America, Europe, the Asia-Pacific region and Brazil. The company ended the quarter with $1.15 billion in cash and cash equivalents and nearly $2.8 billion in long-term debt.

Shares of PVH, which closed down 1.98 percent to $104.59 Tuesday, are up 81.4 percent, year-over-year

“When we execute Tommy and Calvin really well, like we do in Europe, we drive exceptional performance,” Larsson said. “That shows what’s possible also for other regions. And it provides a blueprint for when we connect Calvin and Tommy really close to where the consumer is going, that’s the kind of performance we’re able to drive.”

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