A month and a half after releasing mixed third quarter
results, PVH Corp (PVH 105.63, +6.69), the New York-based owner of Tommy
Hilfiger and other brands, announced that its upcoming fourth quarter results
should come in ahead of its previous outlook. Additionally, the company
announced that it will undertake a strategic restructuring of its Calvin Klein business.
Investors appear to have a positive mentality about last night’s announcement, as shares have moved to extend their recent winning streak, up about 6.8% on Friday. The strong sentiment wasn’t enough, however, to break through the 50-day simple moving average (106.32), which has served as solid resistance for the better part of the past five months.
Getting straight to the guidance, PVH now expects Q4 EPS of at least $1.75, up from prior expectations for EPS of $1.58-1.60. Furthermore, the company now sees revenues for Q4 of at least $2.4 bln.
Recall that about a month and a half ago, PVH management noted that Q4 revenue was to be negatively impacted compared to the prior year period as a result of a 53rd week in 2017. The total negative impact in Q4 compared to the prior year period was approximately $125 mln, comprised of (i) about $80 mln due to the discrepancy in number of weeks of revenue between years, with Q4 of 2018 experiencing one fewer week than did Q4 of last year, and (ii) around $45 mln that shifted out of Q4 of 2018 due to the fiscal calendar misalignment in 2018 as compared to 2017.
PVH also revealed last night a series of strategic changes at the company’s Calvin Klein business.
- The brand is relaunching its CALVIN KLEIN 205W39NYC business under a new name, design approach, and creative direction, and it will focus on connecting directly to the other CALVIN KLEIN brands and “amplifying each category with unique products and aspirational experiences.” Post relaunch, the business will “be designed to evolve the traditional luxury fashion model by connecting with a diverse range of communities, offering an unexpected mix of influences and moving at an accelerated pace.” This change follows the departure of Calvin Klein’s Chief Creative Officer, Raf Simons; Calvin Klein intimated at the time of that announcement in December that the company had settled on a “new brand direction” that “[differed] from Simons’s creative vision.”
- As a result of Calvin Klein’s ongoing assessment of its omnichannel strategy, the company will close its 654 Madison Avenue store in spring 2019. The company is evaluating options for future retail locations and also intends to unveil new consumer experiences both online and offline.
- The leadership team at Calvin Klein has adopted a digital-first approach and introduced a newly formed “Consumer Marketing Organization,” which will work to accommodate the changing demands of today’s consumers. Specialized teams will focus on new marketing areas, including Consumer Engagement and Shopper Experience.
- The business will be streamline its North America division to increase the organization’s effectiveness. A step involved in this process includes consolidation of operations for the men’s Calvin Klein Sportswear and Calvin Klein Jeans business as a means of strengthening the brand’s positioning. The Calvin Klein retail and ecommerce teams will be integrated to create an omnichannel approach that mirrors how consumers browse, shop, and purchase today
PVH expects to incur pre-tax costs of about $120 mln during
the next 12 months in connection with the Calvin Klein restructuring, primarily
consisting of severance, inventory markdowns and allowances, asset impairments,
and lease and other contract termination expenses, including as a result of the
closure of its flagship store on Madison Avenue in New York City. Cash outflows
related to these pre-tax costs are expected to be approximately $60 mln over
the next 12 months.
PVH seems to have skirted the woes that have befallen high-end retail peers of late in connection with underwhelming holiday results. Specifically, Macy’s (M 25.83, -0.28, -1.1%), L Brands (LB 27.00, +0.01, +0.0%), and Chico’s FAS (CHS 6.21, +0.28, +4.8%) gave underwhelming commentary this week as disappointing holiday sales trickled down the industry. With that being said, PVH’s stock has been beaten down since the start of September, -30.9% during that time. Investors’ caution has softened somewhat in the last few weeks, though, as with today’s gains PVH now stands about 13.5% higher YTD.