“In fashion, one day you are in, the next, you are out.” – Heidi Klum
Luxury brands and high-end fashion are strong earners this season, and some brands and businesses are stronger than others. The fashion bottom line isn’t dictated by name recognition or a popularity contest, or about which company makes the coolest commercials. Fashion is a brutal business.
So who was in this past season? Are any designers hiding something behind those perfectly creased pants?
No question about it, Ralph Lauren Corp (NYSE:RL) was “in.” With nothing to hide, the company reported net income of $127 million, for the most recent quarter (fourth quarter of FY2013), an increase of 35% over the net income of $94 million the same period the year previous.
Wholesale segment sales of $796 million in the fourth quarter were 4% below the prior year period, primarily due to the discontinuation of American Living in fiscal year 2013 and a proactive reduction in shipments to certain European customers.
Heidi Klum’s Project Runway counterpart, Michael Kors Holdings Ltd (NYSE:KORS), reported a profit of $101.1 million, up from $43.6 million, the year earlier. Total revenue increased 57% to $597 million from $380 million in the fourth quarter of fiscal 2012.
Retail sales increased 59% to $273 million, driven by a 37% increase in total same-store sales and 67 net new store openings. Wholesale net sales increased 59% to $305 million, and licensing revenue rose 16% to $20 million.
As of March 30, the Company operated 304 retail stores, including concessions, compared to 237 retail stores, including concessions, at the end of the same prior-year period. The Company had 96 additional retail stores, including concessions, operated through licensing partners. Including licensed locations, there were 400 Michael Kors Holdings Ltd (NYSE:KORS) stores worldwide at the end of the fourth quarter of fiscal 2013.
In contrast, Perry Ellis International, Inc. (NASDAQ:PERY) struggled to keep up with the competition. The company reported net income of $11.3 million up from $9.7 million the same quarter the year earlier. However, the company knows how to camouflage its problem areas with the right styles. The truth is that the 16% increase in net income wasn’t due to an increase in product sales. Net sales were down to $255 million from last year’s $259 million. Total revenue was actually down a minor amount from $265.5 million last year to $262.3 million this year. The revenue decrease was attributed price reductions for some men’s private label pants and weakness in the direct-to-consumer segment. The reason net income went up was the sale of the John Henry trademark in parts of Asia, resulting in a gain of $6.3 million.
PVH Corp (NYSE:PVH), formerly known as Phillips-Van Heusen, the parent company of Tommy Hilfiger, Calvin Klein, Van Heusen, and Bass, will release its first quarter earnings in June. However, for the most recent quarter, ended February 3, the company reported revenue of $1.6 billion, an increase of 7% over the prior year.
Overall, PVH is not a good direct comparison to Ralph Lauren Corp (NYSE:RL), Michael Kors Holdings Ltd (NYSE:KORS), or Perry Ellis International, Inc. (NASDAQ:PERY), due to size, extra lines, retail outlets, etc. However, individual brands under the company’s umbrella, such as Tommy Hilfiger and Calvin Klein, make for a much better direct comparison.
Showing strong similarities to the competition, revenue for the Tommy Hilfiger brand increased 9% to $891 million from $816 million the year previous. Revenue in the Tommy Hilfiger North America business increased 11%, with 5% increase in same store sales.
Revenue for the Calvin Klein division increased 14% to $317 million from $279 million in the prior year’s fourth quarter, due in part to strong growth in North American wholesale, and new stores. However, same store sales decreased 2% in the outlet stores.
Of note is that Calvin Klein earnings increased 5% to $73.8 million EBITDA as compared to the prior year’s fourth quarter amount of $70.1 million. However, the increases were partially offset by increased advertising expenses due, in large part, to the Calvin Klein Concept underwear commercial that aired during the Super Bowl. The company did not report a final net income figure for the division, or just how much the Super Bowl ad set them back. However, a little research shows that Super Bowl ads in 2013 cost roughly $3.8 million for a 30 second spot (which is what the company ran). The division’s earnings only increased $3.7 million EBITDA. Considering sales were up in North America following the ad, it will be interesting to see if the trend follows into the next quarter, specifically in men’s underpants, to see if the commercial was worth the expense. (So far, it does not appear so.)
Lauren’s stock price is up about 33% over the past 12 months, almost the same increase that it saw this last quarter in net income. Michael Kors Holdings Ltd (NYSE:KORS) stock is up more than 60% in the same period, again, almost the same amount of increase that it saw in net income. PVH is up nearly 40%. And although the Perry Ellis International, Inc. (NASDAQ:PERY) stock went on a wild ride this year, it ended up virtually flat.
Just like in fashion, there can be more than meets the eye with earnings. Dig deeper, and look for the anomalies. While three of these brands are strong investments right now, keep an eye on Perry Ellis International, Inc. (NASDAQ:PERY). There is nothing to run away from at Perry Ellis International, Inc. (NASDAQ:PERY), but there is nothing to run to either. Give these fashion trends a little bit longer to take hold and see which ones will last before committing too much to any one trend.
Erin McBride has no position in any stocks mentioned. The Motley Fool owns shares of Perry Ellis.
The article 3 Fashion Brands to Love, 1 to Watch originally appeared on Fool.com and is written by Erin McBride.
Erin is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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