PVH Corp., owner of Tommy Hilfiger, Clavin Klein, Warner’s, Olga and True & Co., reported its second quarter revenue increased by 46 percent compared to the same period last year.
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Overall revenue for the second quarter increased 46 percent (increased 40 percent on a constant currency basis) compared to the prior year period. The Company experienced strong performance in its international businesses, primarily driven by Europe. The prior year period was impacted negatively by extensive temporary store closures.
Total direct to consumer revenue for the second quarter increased 19 percent compared to the prior year period. Digital commerce was flat to the prior year period despite exceptionally strong growth in 2020 due to temporary store closures and occupancy restrictions. In addition, traffic in stores in the current year has significantly improved compared to the prior year due to re-openings and reduced occupancy restrictions. The Company’s retail stores continued to face some pressure as a result of the pandemic, with certain stores in Europe, Australia and Japan temporarily closed for varying periods of time during the current year’s second quarter.
Total wholesale revenue for the second quarter increased 77 percent compared to the prior year period, driven by strong performance in Europe. In addition, the Company experienced a significant increase in its sales to the digital businesses of its traditional and pure play wholesale customers.
Overall gross margin in the second quarter was 57.7 percent as compared to 55.9 percent in the prior year period, with substantial improvements across all regions, primarily due to less promotional selling. Inventory levels remain lean, down 13 percent compared to the prior year period.
Second quarter revenue increased 46 percent to US$2.313 billion (increased 40 percent on a constant currency basis) compared to the prior year period.
The revenue increase compared to the prior year period reflects a 41 percent increase (35 percent increase on a constant currency basis) in the Tommy Hilfiger business compared to the prior year period, including a 40 percent increase (32 percent increase on a constant currency basis) in Tommy Hilfiger International revenue and a 45 percent increase (43% increase on a constant currency basis) in Tommy Hilfiger North America revenue.
In the Calvin Klein business, it is reported to have a 56 percent increase (50 percent increase on a constant currency basis) compared to the prior year period, including a 47 percent increase (37 percent increase on a constant currency basis) in Calvin Klein International revenue and a 75 percent increase (74 percent increase on a constant currency basis) in Calvin Klein North America revenue.
It is also reported that there is a 37 percent increase in the Heritage Brands business compared to the prior year period.
Earnings per share on a GAAP basis was US$2.51 for the second quarter of 2021 compared to a loss per share of US$(0.72) in the prior year period. Earnings per share on a non-GAAP basis was US$2.72 for the second quarter of 2021 compared to US$0.13 in the prior year period.
Net interest expense on a GAAP basis decreased to US$26 million from US$32 million in the prior year period. Included in net interest expense for the prior year period was a US$5 million expense resulting from the remeasurement of a mandatorily redeemable non-controlling interest that was recognised in connection with the Australia acquisition. Net interest expense on a non-GAAP basis for the prior year period excludes this amount. Net interest expense of US$26 million on a GAAP basis (there were no non-GAAP exclusions in the second quarter of 2021) is a decrease from US$28 million on a non-GAAP basis in the prior year period.
The Company expects 2021 revenue and earnings to be impacted by the pandemic in the second half of 2021. While the international businesses have exceeded and are expected to continue to exceed 2019 pre-pandemic revenue levels for the remainder of 2021, the North America businesses are expected to remain challenged, as international tourism, which is the source of a significant portion of regional revenue, is not expected to return to any significant level this year.
The updated 2021 outlook also reflects the sale of certain intellectual property and other assets in connection with the Heritage Brands transaction. This transaction will result in a decrease to 2021 revenue of approximately 2 percent as compared to 2020.
The Company expects gross margin to continue to reflect improvements for the remainder of 2021 compared to 2020 due to less promotional selling and a favorable shift in regional sales mix.
Revenue in 2021 is projected to increase 26 percent to 28 percent (increase 24 percent to 26 percent on a constant currency basis) as compared to 2020. The Company currently projects that 2021 earnings per share on a GAAP basis will be approximately US$8.80 compared to a loss per share of US$(15.96) in 2020. The Company currently projects that 2021 earnings per share on a non-GAAP basis will be approximately US$8.50 compared to a loss per share of US$(1.97) in 2020. Net interest expense in 2021 on a GAAP basis is projected to decrease to approximately US$105 million compared to US$121 million in 2020.
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Stefan Larsson, Chief Executive Officer, commented, “We delivered another quarter of high-quality growth and strong performance above our guidance. This was driven by disciplined execution of our key strategic priorities, led by Calvin Klein and TOMMY HILFIGER and our international markets, focused on product strength and winning in the marketplace, super-charged by e-commerce. Our international performance was particularly strong, which performed above 2019 pre-pandemic levels. Based on our strong first half results, along with strong underlying trends, we are raising our full year outlook, which continues to reflect gross margins above 2019 pre-pandemic levels and further improvement in our operating margin.”
Mr. Larsson added, “Looking ahead, we are pleased with our recovery, which has been faster than expected across both global brands. Our continued execution of our key strategic priorities will drive business performance in the near-term, while also positioning the Company for long-term, sustainable profitable growth.”