PVH Corp. is expecting more revenue declines in its wholesale business as the coronavirus pandemic pushes more retailers to seek bankruptcy protection.
The Tommy Hilfiger and Calvin Klein parent announced today that its wholesale revenues declined 40% due to the temporary closures of the majority of its partners’ stores around the world during the first month of the second quarter. The shutdowns, it said, subsequently led to a “sharp reduction” in shipments and is likely to continue for the rest of 2020.
“Many traditional wholesale partners are planning their store-based businesses conservatively for the balance of this year, which will result in a reduction in shipments to these customers,” chairman and CEO Emanuel Chirico said in a statement. “The company expects the revenue decline in its North America wholesale business will be significantly more pronounced than in Europe and Asia due in part to recent bankruptcies.”
However, PVH reported that its online channels — which grew 87% in the three-month period — “exhibited strength across the company’s traditional and pure-play wholesale customers.” It added that this trend has continued into the third quarter to date, with all of its wholesale accounts buying inventory “to accommodate their strong digital trends.”
During the second quarter, the New York-based retail group reported adjusted earnings per share of 13 cents, much less than the prior year’s adjusted earnings per share of $2.10 but well above analysts’ estimates of a loss of $2.42. Revenues decreased 33% to $1.58 billion but still bested market watchers’ estimates of $1.25 billion.
Although direct-to-consumer sales fell 24% in Q2, PVH said that DTC trends have “improved” in the third quarter to date, with sales running down 15% compared to the prior year period.
“Our second-quarter revenue exceeded our expectations, reflecting better than expected performance in all our markets and channels,” Chirico said. “We continue to see outperformance in our digital businesses and across our comfort and casual assortments.”
He added, “As we head into the third quarter, trends in China and Europe continue to be very encouraging. However, our North America business continues to experience pressure due to the resurgence of COVID-19 cases and the lack of international tourist traffic coming to the U.S.”
At the end of the quarter, PVH had about $1.4 billion of cash on hand and roughly $1.3 billion of available borrowings under its revolving credit facilities.
“As we continued to navigate the pandemic during the second quarter, we took immediate actions to address changes in our business needs by right-sizing our costs, driving our digital businesses, managing our inventories and raising additional capital to further support our already-solid financial position,” Chirico added. “We are confident that these focus areas — improving our products and assortments, strengthening our distribution, especially in our digital channel, and capturing cost efficiencies — will best position us to gain market share globally and win with our consumers.”