How Calvin Klein and Tommy Hilfiger Gave PVH a Strong 1Q16

Phillips-Van Heusen (PVH) posted $1.9 billion in revenue for fiscal 1Q16. That’s a 2.1% YoY (year-over-year) increase on a GAAP (generally accepted accounting principles) basis. The quarter ended May 1, 2016.

On a constant currency basis, its revenue increased 3%. This increase was driven by an impressive 11% rise on a GAAP basis in Calvin Klein sales and a ~3% growth on a GAAP basis in Tommy Hilfiger revenue. This was partially offset by a ~12% decline in the revenue for Heritage Brands.

PVH’s top line performance in the current quarter is better than its closest competitors Ralph Lauren (RL) and VF Corporation (VFC) with returns of -0.7% and 0.1%, respectively, in their last reported quarters. Coach (COH) and Lululemon Athletica (LULU) delivered double-digit sales growth in their last reported quarters.

Calvin Klein delivered another solid quarter as the brand’s presence continued to improve across the markets. Both Tommy Hilfiger and Calvin Klein remained strong in Europe and China, while US markets continued to be under pressure. US retail businesses, in particular, were affected the worst due to weaker traffic and higher promotional trends.

PVH’s digital commerce businesses saw revenue growth in excess of 20% YoY in 1Q16. The online channel continues to be the company’s fastest-growing distribution channel.

Commenting on PVH’s results, Emanuel Chirico, the company’s chairman and chief executive officer, said, “We are very pleased with our first quarter 2016 results, which exceeded our expectations despite the difficult retail environment experienced in the U.S. market. Our Calvin Klein and Tommy Hilfiger businesses were the highlight, with significant strength demonstrated by our international businesses. Outperformance in Europe and China further demonstrated the power of our brands in key markets and their ability to post growth against a challenging macroeconomic environment.”

PVH’s EPS (earnings per share) increased by 33% on a constant currency basis in 1Q16 compared to 1Q15. On a GAAP basis, EPS remained flat at $1.50 per share, beating Wall Street’s expectations by $0.07 and the company’s own guidance by $0.05. According to the company, the beat was driven by strong Calvin Klein and Tommy Hilfiger performances as well as the difference in the timing of taxes and foreign exchange assumptions.

Investors who want exposure to PVH can consider the iShares Morningstar Mid-Cap (JKG), which invests 0.48% of its portfolio in PVH.