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PVH Corporation (PVH) has managed to beat expectations yet again. The company reported better-than-expected quarterly results, with adjusted earnings per share for the fourth quarter of fiscal 2012 rising over 34% year over year to $1.60, beating its own guidance range of $1.48–$1.49 and the Zacks Consensus Estimate of $1.50. The upside was primarily driven by strong revenue growth and improved margins. Adjusted earnings include a favorable impact from PVH Corp.'s change in accounting method for retirement plans. Excluding the same, adjusted earnings came at $1.54 per share.
However, earnings including one-time items, increased over two folds to $1.09 per share from 48 cents delivered in the year-ago quarter.
Quarter in detail
During the quarter, total revenue of this Zacks Rank #2 (Buy) company increased 6.7% to $1,636.2 million compared with $1,532.8 million in the year-ago quarter and surpassed the Zacks Consensus Estimate of $1,591.0 million.
The year-over-year revenue growth at the company's Tommy Hilfiger and Calvin Klein segments were offset by a decline in the Heritage Brands segment, negative impact from exiting the Izod and Timberland businesses, as well as unfavorable foreign currency exchange rates. The company's top line benefited from an additional week in the quarter.
PVH Corp.'s adjusted operating profit surged 38.4% to $180.3 million from $130.3 million in the year-ago comparable quarter. The company's operating margin grew 250 basis points (bps) to 11.0% compared with 8.5% in the year-ago period. The year-over-year improvement in operating profit was primarily driven by a 320 bps rise in gross margin resulting from increased operating income at the company's Tommy Hilfiger and Calvin Klein segments.
Revenue at the company's Tommy Hilfiger segment increased 9% to $891.1 million from $815.8 million in the year-ago period, primarily driven by 11% and 8% growth in North American and International businesses, respectively. The segment's revenue growth was partially offset by an unfavorable impact of 1% from currency exchange rates.
The segment's adjusted operating profit grew 45% to $101.8 million from $70.2 million in the fourth quarter of fiscal 2012. The increased operating profit was a result of revenue growth and improved margins driven by higher average unit retail selling price per unit along with a decline in product costs.
Calvin Klein's revenue improved 14% to $317.4 million compared with $278.5 million in the year-ago quarter. The year-over-year increase in revenue was primarily driven by improved sales in North America along with store expansion initiatives and benefits from an additional week in the quarter. However, a decline of 2% in comparable store sales partially offset the segment's revenue growth.
The segment's operating profit increased 5.0% to $73.8 million from $70.1 million primarily driven by robust sales and improved gross profit, partially offset by higher advertising expenses.
The company's Heritage Brands segment posted disappointing results with revenue falling 2% year over year to $427.7 million from $438.5 million in the fourth quarter of fiscal 2011. The decline was driven by an adverse impact of 4% due to the company's exit from the Izod and Timberland businesses. However, adjusted operating profit jumped over two folds to $26.6 million from $10.5 million in the prior-year quarter driven by increased gross profit resulting from its exit from the lower margin carrying businesses of Izod and Timberland.
PVH Corp. expects fiscal 2013 total revenue to be $8.2 billion with Warnaco contributing approximately $2.15 billion. Further, the company now projects synergies from the newly acquired Warnaco businesses to be $25 million in fiscal 2013 compared with $50 million expected earlier. In addition, the acquisition is expected to dilute PVH Corp.'s fiscal 2013 earnings per share by 25 cents.
Based on the abovementioned assumptions, the company is anticipating reporting earnings of $7.00 per share in fiscal 2013.
For first quarter fiscal 2013, the company is projecting revenue of $1.9 billion and earnings of $1.33 per share.
Other Stocks to Consider
Other stocks worth considering in the apparel retail industry are Ralph Lauren Corporation (RL), Hanesbrands Inc. (HBI) and Joe's Jeans Inc. (JOEZ). All these stocks hold a Zacks Rank #2 (Buy).
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