Amidst a challenging global retail environment, Phillips-Van Heusen Corp. (PVH) was able to deliver better-than-expected second quarter results, surpassing both the top and bottom line expectations.
Earnings per share (excluding one-time items), which came in at 60 cents, well exceeded the company’s guidance range of 35 cents to 45 cents and surpassed the Zacks Consensus Estimate of 44 cents. However, EPS dipped 9.1% year over year, compared to 66 cents in the prior year quarter.
On a reported basis, Van Heusen posted EPS of 51 cents, down 8.9% from 56 cents in the year-ago quarter.
For the third quarter, management expects EPS in the range of 80 cents to 85 cents. Van Heusen has raised its earnings outlook for full year as it now expects EPS in the range of $2.30 to $2.40, up from a prior view of $2.05 to $2.30.
Consolidated revenues for the quarter under review slipped 5.6% to $529.3 million, compared to $561 million reported in the prior-year quarter. However, it surpassed the high-end range of the management’s guidance of $510 million to $520 million.
The wholesale and retail businesses performed above expectations, primarily the sportswear businesses. However, the total wholesale and retail revenue declined 5.1% year over year to $460.3 million. Calvin Klein total licensing revenues fell 10.0% to $65.7 million.
Same-store sales for Van Heusen’s retail divisions fell 3.0% compared to 2.0% decline in the year ago quarter. However, same-store sales improved substantially from an 8.0% decline in the first quarter.
For the third quarter, total revenues are projected in the range of $655 million to $665 million, or down 5.0% to 6.0% compared to the prior-year quarter. The company raised its total revenues forecast for the full year to between $2.32 billion and $2.34 billion, a decline of 2.0% to 3.0% year over year (compared to 3.0% to 4.0% decline predicted earlier).
To combat the downturn, management has been taking cost-cutting measures such as lowering headcounts, reducing excess stock and realigning the organizational structure. Management has also stopped the domestic production of machine-made neckwear and closed its Geoffrey Beene retail stores.
At the end of the quarter, Van Heusen had cash and cash equivalents of $369.6 million and long-term debt of $399.6 million, reflecting debt-to-capitalization ratio of 27.5%. Management expects to generate cash flow between $65 million and $75 million, after adjusting capital expenditure of $40 million.
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