Phillips-Van Heusen Corporation reported 2008 fourth quarter and full year results.

For the fourth quarter of 2008:
Earnings per share excluding restructuring items was $0.30, which was at the top end of the Company’s guidance and exceeded the consensus estimate. GAAP loss per share was $0.74, which included $85.1 million of pre-tax costs related to restructuring items. The prior year’s fourth quarter GAAP earnings per share was $0.55.
GAAP revenue was $577.8 million, a decrease of 1% compared to the prior year’s fourth quarter of $584.5 million.

For the year 2008:
• Earnings per share excluding restructuring items was $2.95. GAAP earnings per share was $1.76, which included $99.3 million of pre-tax costs related to restructuring items. For the prior year, GAAP earnings per share was $3.21.
• GAAP revenue increased 3% to $2.49 billion from $2.43 billion in the prior year.

Fourth Quarter Results
GAAP revenue decreased 1% for the quarter. Revenue in the Calvin Klein licensing business was relatively flat to the prior year’s fourth quarter, as growth attributable to recently launched product categories was offset by a decline in the fragrance business, which was particularly affected by reductions in travel and discretionary spending resulting from the difficult economic environment.

Revenue in the Company’s wholesale and retail businesses decreased 3% due principally to the negative impact of the economic slowdown on the Company’s wholesale sportswear and outlet retail businesses, combined with the completion of the exit from the Company’s Geoffrey Beene outlet retail division during the fourth quarter of 2008. The Company’s outlet retail comparable stores sales declined 9% in the fourth quarter. Partially offsetting the revenue decreases was revenue generated by the new Timberland wholesale men’s sportswear business and additional Calvin Klein retail stores that were opened in 2008.

Earnings before interest and taxes, excluding $85.1 million related to restructuring items, was $35.4 million. This is a 33% decrease compared to the prior year’s GAAP earnings before interest and taxes of $52.7 million and resulted from the sales declines in the Company’s wholesale and retail businesses mentioned above and a significant reduction in gross margin due to heavy promotional selling during the holiday season in response to the Company’s aggressive focus on reducing inventory levels. On a GAAP basis, the Company had a loss before interest and taxes in the fourth quarter of $49.8 million.

In the Calvin Klein licensing business, earnings before interest and taxes increased 16%, excluding $0.5 million related to restructuring items. On a GAAP basis, the increase in earnings before interest and taxes was 15%, driven principally by a shift in advertising spending from the fourth quarter into the third quarter in 2008 as compared to the prior year. The shift in timing of the spending related to activities in 2008 surrounding the celebration of the 40th anniversary of Calvin Klein.

2008 Full Year Results:
For the full year, total GAAP revenue increased 3% to $2.49 billion in 2008 from $2.43 billion in 2007, driven by revenue growth of 13% in the Company’s Calvin Klein licensing business.

For the full year, earnings before interest and taxes in the Company’s Calvin Klein licensing business grew 20% on both a GAAP and non-GAAP basis. Earnings decreases in the Company’s heritage brand outlet retail and wholesale sportswear businesses more than offset the Calvin Klein licensing improvement and resulted in the reduced 2008 GAAP and non-GAAP earnings per share amounts noted above.

Balance Sheet:
The Company ended the year with $328.2 million in cash, an increase of $58.3 million over the prior year. This increase is after a $25.0 million voluntary pension contribution made in the fourth quarter of 2008 and full year capital spending of $88.1 million.

Inventories ended the year down 12% compared to the prior year and reflect the Company’s focus on aggressively managing inventory levels and the expectation of first quarter sales declines.

2009 Guidance:

Earnings Per Share and Revenue
The estimates below reflect the belief that economic conditions and consumer spending will continue on their current trends during the first three quarters of 2009 with a moderate improvement taking place in the fourth quarter of the year.

Full Year Guidance:
The Company is currently projecting 2009 earnings per share to be in a range of $2.00 to $2.30, which excludes approximately $10 million of pre-tax costs related to restructuring items associated with the Company’s previously announced restructuring initiatives. On a GAAP basis, the Company is currently planning 2009 earnings per share to be in a range of $1.88 to $2.18.

Total revenue for 2009 is currently projected to be approximately $2.30 billion to $2.33 billion, a decrease of approximately 3% to 4% from the Company’s 2008 non-GAAP revenue, which excludes approximately $95 million of revenue associated with the Company’s exited Geoffrey Beene outlet retail division. On a GAAP basis, 2009 revenue is currently projected to decrease approximately 7% to 8% from 2008.

The Company is currently projecting Calvin Klein royalty revenue to remain relatively flat in 2009, as anticipated global licensee sales growth of 4% in local currency is expected to be offset by a negative impact of $9 million to $12 million from a stronger U.S. dollar. Revenue for the Company’s wholesale businesses is currently projected to decrease 6% to 7% in 2009, and the Company’s retail businesses are currently estimating 2009 comparable store sales declines of 6% to 7%. These sales declines are expected to be partially offset by approximately $35 million of sales attributable to 2008 and 2009 Calvin Klein store openings, the latter principally related to the conversion of Geoffrey Beene outlet retail store locations to the Calvin Klein format.
 
Phillips-Van Heusen Corporation