PVH Corp (PVH) 2002 Q1 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to the Phillips Van Heusen Corporation first quarter earnings release. This web cast and conference call is being recorded on behalf of PVH and consists of copyrighted material.

It may not be recorded, reproduced, retransmitted, rebroadcast, downloaded or otherwise used without PVH's express written permission. Your participation in the conference call portion constitutes your consent to having any question - questions or comments you make appear

on the transcript or broadcast of this call. The information made available on this web cast and conference call contains certain forward-looking statements which reflect PVH's current view of future events and financial performance. Any such forward-looking statements are subject to risks and uncertainties.

The company's future results of operations could differ materially from historical results or current expectations as more fully discussed in our safe harbor statements found in our SEC filings. The company does not undertake any obligation to update publicly any forward-looking

statement including without limitation any estimate regarding revenues or earnings whether as a result of the receipt of new information, future events or otherwise.

At this time, I would like to inform you that all participants are in a listen only mode. At the request of the company we will open up the conference for questions and answers following the presentation.

I will now turn the conference over to Mr. Bruce Klatsky. Please go ahead, sir.

Thank you. Good morning, everybody. Thank you for joining us. I'm joined this morning by our President, Mark Weber, our Chief Financial Officer Manny Chirico and of course, our Treasurer and

point person for investor relations, Pam Hootkin.

We are certainly pleased with our results for the first quarter. Those of you who followed up and participated in prior calls know that our view was that the first half of last year was so incredibly strong for us and the fact that the economic rebound occurring during the first half

that we felt our first half would be somewhat weak, down slightly and then we would overperform or increase our sales and earnings in the second half such that we would have an up year.

That was our position. We are certainly correct that we could match the performance of the first half last year. But whether it's the economic rebound is somewhat better, our product offerings are better, you guys can pick. We did considerably better in terms of sellings and most importantly sellthroughs than we anticipated.

By component of our business, footwear continued its improvement with a slight sales increase. But we were particularly impressed with the sellthroughs that we're having had in the first quarter. And they were somewhat better than what we planned.

Our sportswear business experienced significantly greater demand than what we'd anticipated. And the sellthroughs were significantly better than what we anticipated and significantly better than the men's sportswear business in general, as our main floor classification approach

continued to be significantly where the fish were swimming in our brands, both Izod, Van Heusen. And even Geoffrey Beane performed better than we had hoped during the first quarter.

If there was a weak area certainly relative to last year it was our dress shirt area.

And that was planned. As most of you know, we've eliminated what we would characterize as our peripheral business, specifically our Manhattan business, our FUBU business, the Regis by Van Heusen business, all by plan, all expected.

But our core businesses,

, Van Heusen, Geoffrey Beane, DKNY, Kenneth Cole and Private Label all did better than what we had hoped in dress shirts, although the reduction in apparel from last year was largely centered around those businesses that we eliminated that we were in last year, as I said.

So bottom line from a sales and profit perspective, we did better than we'd hoped. It was because our brands outperformed the environment. And we are cautiously optimistic as we look forward.

I would say in that regard that we are still being conservative for the second quarter. And Manny will be more specific about that. But we expect us to be flatish or down slightly, waiting for the consumer to react.

If we are wrong here and the bounce back is more aggressive than what we'd hoped for we are - we do have the ability to react and should be able to take advantage of that.

Finally and for us most importantly, we are very proud of our asset management.

We think our balance sheet is as clean as it's ever been. Our receivable performance has been terrific. Our inventories are clean as a whistle. And all of that resulted in a strong cash flow that you see as you look at our statement.

So I guess we're pleased that we did better than we thought we would. We are still assuming that the second quarter is not going to be

and still think the second half will be somewhat stronger. And we are in a position to react to whatever the consumer wants.

And fundamentally, I believe that the pipelines are so clean that if a consumer reacts you know, we get a significant bounce in both sales and earnings.

With that, I'll turn it over to Manny.

Thanks, Bruce. As

Bruce said, we were quite pleased with our first quarter results which were $0.02 ahead of our previous earnings per share estimate. Sales in the first quarter which we planned to decline six to eight percent were down only 4.8 percent. The overall sales decline was due to

lower planned dress shirt sales and relates principally to the discontinuation of FUBU, Regis and Manhattan dress shirt line. As planned, operating income for the apparel segment in the first quarter declined 30 percent to $7.3 million.

The reduction is attributable to the 6.5 percent apparel sales decline. However, gross margins improved due to more regular priced selling and the reconfiguration of our sourcing operation.

Our footwear segment continued its financial turnaround.

Operating income for the footwear segment improved 27 percent to $2.8 million. Footwear operating income margins improved 70 basis points to 3.1 percent and 2.4 percent last year. The increase is due to higher

gross margins and is consistent with improvements achieved throughout all of last year. The net loss in the first quarter was $800,000 or 3 cents per share, which was two cents ahead of our previous guidance and compared to net income of $600,000 and two cents a share last year.

Our balance sheet shows an improvement in our net debt position from the prior year of over $83 million as we generated significant cash flow during this period. We continue to effectively manage our net assets with inventory and receivables each down nearly 20 percent from the prior year.

This improvement has had a meaningful impact on interest expense in the first quarter. And favorable interest expense comparisons are expected to continue through the second quarter.

Looking out to the second quarter, we are estimating sales for the quarter to be down one to 2 percent with earnings

per share projected to be 24 to 25 cents compared to last year's 25 cents. For the year, sales are expected to be flat. As sales increases of three to 4 percent in the second half of the year are expected to offset the first

half sales decline. We are increasing our 2002 earnings per share forecast to a range of a $1 to $1.05 which is 16 to 22 percent improvement over 2001 earnings per share.

We are also increasing for the year our free cash flow estimates by $5 million to a range of 20 to $25 million from our previous estimated range of 14 to $20 million.

With that, I'd like to open it up for questions that you might have.

The question-and-answer session will begin now. If you're using a speakerphone please pick up the handset before pressing any numbers. Should you have a question, please press one followed by four on your touch-tone phone. If you would like to withdraw your question please press one, followed by three.

Your questions will be taken in the order they are received. Please standby for your first question.

Our first question comes from

. Ma'am, please pose your question.

Good morning and congratulations. Bruce or whoever wants to answer this.

I wondered, I heard on the Nordstrom conference call and in talking with them they seemed to have a pick up in the men's furnishing's area and dress shirts. And I wondered if you're starting to experience that yourself?

Thanks,

. The answer is yes. Our dress shirt business is - the demand for our dress shirts is significantly greater than it's been for some time. So we are starting to experience it.

We are not overly exuberant or overly optimistic of what will happen to the rest of the year. But certainly, the demand for our core products during the first quarter was somewhat more than we'd anticipated. So we are seeing that definitely.

Great. OK. That's my only question.

Thanks,

.

Again, as a reminder, if you do have a question or a comment, please press one followed by four on your touch-tone phones at this time.

If there are no further questions I will turn the conference back to Mr. Klatsky to conclude.

OK. Thank you very for participating with us. I think, as always, everything that we share with you is very transparent in the release and self explanatory. And I also understand that this is a busy earnings release season.

We'll look forward to speaking with you in the next quarter. And of course

and

are always available as are Mark or I to answer any of your questions at any time. Have a good day everybody.

Ladies and gentlemen, that concludes our conference for today.

Thank you all for participating and have a nice day. All parities may now disconnect.