PVH Corp. [NYSE:PVH] announced today that it currently expects
revenue in the fourth quarter and full year 2018 to be at least
$2.40 billion and $9.57 billion, respectively, which is above its
plan.
The Company also revised its projected fourth quarter and full
year 2018 earnings per share outlook. The Company is unable to
project fourth quarter and full year 2018 earnings per share on a
GAAP basis without unreasonable efforts, as further discussed
below. The Company currently expects its earnings per share on a
non-GAAP basis for the fourth quarter 2018 to be at least $1.75,
which is $0.15 per share above the high end of its guidance range
previously announced on November 29, 2018 and includes a $0.05 per
share benefit due to lower than expected income tax expense. The
Company currently expects its full year 2018 earnings per share on
a non-GAAP basis to be at least $9.50. The projected fourth quarter
and full year 2018 earnings per share on a non-GAAP basis excludes,
among other things, the pre-tax costs expected to be incurred in
connection with a restructuring in the Company's Calvin Klein
business, discussed below, and the resulting tax effects.
Emanuel Chirico, Chairman and Chief Executive Officer,
commented, “Our improved 2018 outlook reflects the power of our
diversified global business model. Specifically, we are
experiencing outperformance across all of our businesses relative
to our previous guidance, despite the increasingly volatile
macroeconomic and geopolitical environment.”
Calvin Klein Restructuring:The Company's Calvin Klein
business issued a press release earlier today detailing the
strategic changes for the CALVIN KLEIN brand. The Company expects
to incur pre-tax costs of approximately $120 million over 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, New York. Cash
outflows related to these pre-tax costs are expected to be
approximately $60 million over the next 12 months.
Earnings Guidance:The Company’s projection of fourth
quarter and full year 2018 earnings per share on a non-GAAP basis
excludes (i) the pre-tax costs incurred and to be incurred related
to the April 2016 acquisition of the 55% interest in the Company’s
former Tommy Hilfiger joint venture in China that it did not
already own (the “TH China acquisition”), consisting of noncash
amortization of short-lived assets, (ii) the pre-tax costs to be
incurred in connection with the Calvin Klein restructuring and
(iii) the pre-tax actuarial gain or loss on the Company’s
retirement plans. The estimated tax effects of the above pre-tax
items are also excluded from the Company’s projections of fourth
quarter and full year 2018 earnings per share on a non-GAAP
basis.
The Company is unable to provide a full reconciliation of its
updated fourth quarter and full year 2018 earnings per share
guidance on a non-GAAP basis to the corresponding measures on a
GAAP basis without unreasonable efforts, as there are significant
uncertainties with respect to (i) the timing of the costs to be
incurred in connection with the Calvin Klein restructuring over the
next 12 months and, more critically, during the Company's fourth
quarter and full year 2018, which end on February 3, 2019, and (ii)
the actuarial gain or loss on the Company’s retirement plans, to be
recorded in the fourth quarter 2018, due to the recent volatility
in the financial markets.
The reconciling information for the fourth quarter and full year
2018 earnings per share guidance on a non-GAAP basis to the
corresponding measures on a GAAP basis that is available without
unreasonable efforts is presented at the end of this release,
consisting of the costs incurred and to be incurred related to the
TH China acquisition and the resulting estimated tax effect.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995: Forward-looking statements in this press
release, including, without limitation, statements relating to the
Company’s future revenue and 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 may be considered to be highly
leveraged 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; (iii) the levels of
sales of the Company’s apparel, footwear and related products, both
to its wholesale customers and in its retail stores, 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, fuel prices, reductions in travel, fashion trends,
consolidations, repositionings and bankruptcies in the retail
industries, repositionings of brands by the Company’s licensors,
and other factors; (iv) the Company’s ability to manage its
growth and inventory, including the Company’s ability to realize
benefits from acquisitions; (v) quota restrictions, the
imposition of safeguard controls and the imposition of 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; (vi) the availability and cost of raw
materials; (vii) 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); (viii) changes in available factory and shipping
capacity, wage and shipping cost escalation, civil conflict, war or
terrorist acts, the threat of any of the foregoing, or political or
labor instability in any of the countries where the Company’s or
its licensees’ or other business partners’ products are sold,
produced or are planned to be sold or produced; (ix) disease
epidemics and health related concerns, which could result in closed
factories, reduced workforces, scarcity of raw materials and
scrutiny or embargoing of goods produced in infected areas, as well
as reduced consumer traffic and purchasing, as consumers become ill
or limit or cease shopping in order to avoid exposure;
(x) acquisitions and divestitures and issues arising with
acquisitions, divestitures and proposed transactions, including,
without limitation, the ability to integrate an acquired entity or
business into the Company with no substantial adverse effect on the
acquired entity’s, the acquired business’s or the Company’s
existing operations, employee relationships, vendor relationships,
customer relationships or financial performance, and the ability to
operate effectively and profitably the Company’s continuing
businesses after the sale or other disposal of a subsidiary,
business or the assets thereof; (xi) 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; (xii) significant fluctuations of the U.S. dollar
against foreign currencies in which the Company transacts
significant levels of business; (xiii) 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; (xiv) the
impact of new and revised tax legislation and regulations,
particularly the U.S. Tax Cuts and Jobs Act of 2017 and the still
to-be-issued regulations with respect thereto that might
disproportionately affect the Company as compared to some of its
peers due to the specific tax structure of the Company and its
greater percentage of revenues and income generated outside of the
U.S.; and (xv) other risks and uncertainties indicated from
time to time in the Company’s filings with the Securities and
Exchange Commission (“SEC”).
The earnings per share guidance provided in this press release
is on a non-GAAP basis, as defined under SEC rules. A full
reconciliation of the earnings per share guidance on a non-GAAP
basis cannot be provided without unreasonable efforts. The
reconciling information that is available without unreasonable
efforts is included in the financial information later in this
release, as well as in the Company’s Current Report on Form 8-K
furnished to the SEC in connection with this release, which is
available on the Company’s website at www.PVH.com and on the SEC’s
website at www.sec.gov.
Revenue and earnings per share guidance in this release speaks
as of January 10, 2019, the date on which it was made. 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.Full Year and Quarterly Reconciliations of
GAAP to Non-GAAP Amounts
The Company is presenting its 2018 estimated results excluding
(i) the pre-tax costs incurred and to be incurred related to the
April 2016 acquisition of the 55% interest in the Company’s former
Tommy Hilfiger joint venture in China that it did not already own
(the “TH China acquisition”), consisting of noncash amortization of
short-lived assets, (ii) the pre-tax costs to be incurred 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, New York, (iii) the pre-tax actuarial
gain or loss on the Company’s retirement plans and (iv) the
estimated tax effects associated with the foregoing pre-tax
items.
A full reconciliation of the Company’s current 2018 estimated
results on a non-GAAP basis to the corresponding GAAP measures
cannot be provided without unreasonable efforts due to the
significant uncertainties with respect to (i) the timing of the
costs to be incurred in connection with the Calvin Klein
restructuring and (ii) the actuarial gain or loss on the Company’s
retirement plans to be recorded in the fourth quarter. However, the
reconciling information that is available without unreasonable
efforts, consisting of the pre-tax costs incurred and to be
incurred related to the TH China acquisition and the resulting
estimated tax effect, is set forth in the reconciliation below. The
previous 2018 net income per common share guidance as provided in
the Company’s 2018 third quarter earnings press release issued on
November 29, 2018 and set forth below, presented on both a GAAP and
non-GAAP basis, is no longer valid and presented only for
informational purposes.
The Company believes presenting its results on a non-GAAP basis
provides useful additional information to investors. The Company
excludes amounts from its non-GAAP results that it deems to be
non-recurring or non-operational and believes that excluding them
(i) facilitates comparing current results 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 on
a non-GAAP basis 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 on a non-GAAP
basis 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 as 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 effects associated with the above pre-tax
items are based on the Company’s assessment of deductibility. In
making this assessment, the Company evaluates each item that it has
identified above as a non-GAAP exclusion to determine if such item
is taxable or tax deductible, and if so, in what jurisdiction the
tax expense or tax deduction would occur. The estimated tax effect
associated with the pre-tax costs incurred and to be incurred
related to the TH China acquisition is identified as tax
deductible, with the tax effect taken at the statutory income tax
rate of the local jurisdiction.
2018 Net Income
Per Common Share Reconciliations
Current Guidance
Previous Guidance(superseded)
Full Year2018(Estimated)
Fourth Quarter2018(Estimated)
Full Year2018(Estimated)
Fourth Quarter2018(Estimated)
GAAP net income per common share attributable to PVH Corp.
$9.10 - $9.12 $1.54 - $1.56 Estimated per common share impact of TH
China acquisition $(0.23) $(0.04) $(0.23) $(0.04) Estimated per
common share impact of Calvin Klein restructuring (a) (a) Estimated
per common share impact of actuarial gain or loss on retirement
plans (b) (b) Net income per common share attributable to PVH Corp.
on a non-GAAP basis at least $9.50 at least $1.75 $9.33 - $9.35
$1.58 - $1.60 (a) The Company is unable to provide without
unreasonable efforts the projected net income per common share
impact of the costs to be incurred in connection with the Calvin
Klein restructuring announced today due to the significant
uncertainties with respect to the timing of such costs, including
which portion, if any, will be incurred during the current quarter,
which ends on February 3, 2019. (b) The Company is unable to
provide without unreasonable efforts the projected net income per
common share impact of the gain or loss on the Company’s retirement
plans, to be recorded in the current quarter, due to the recent
volatility in the financial markets.
The previous GAAP net income per common share attributable to
PVH Corp. 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, if any, that the Company engages in or suffers
during the period, including the Calvin Klein restructuring, (iii)
any market or other changes affecting the Company’s expected
actuarial gain or loss on retirement plans, (iv) the imposition of
significant tariffs on apparel, footwear and accessories imported
from China or any of the Company’s other significant sourcing
countries, (v) adjustments to the Company’s income tax provision
related to the U.S. Tax Cuts and Jobs Act of 2017 (the "Tax
Legislation"), including as a result of changes in the provisional
amounts recorded in 2017 during the permitted measurement period,
as regulatory guidance may be issued related to the Tax Legislation
and as the Company completes its final analysis of the impacts of
the Tax Legislation, or (vi) any discrete tax events including
changes in tax rates or tax law and events arising from audits or
the resolution of uncertain tax positions. The Company has no
current understanding or agreement regarding any such transaction
or definitive plans regarding any such activity that has not been
announced or completed.
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version on businesswire.com: https://www.businesswire.com/news/home/20190110005670/en/
Dana PerlmanTreasurer, Senior Vice President, Business
Development and Investor Relations(212)
381-3502investorrelations@pvh.com
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