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07 Earnings Contact Transcript Great day, everybody and welcome to today's Calvin Klein Underwear Classic Womens Phillips Van Heusen Company third quarter 2007 earnings launch convention get in touch with. Modern contact is becoming recorded. It might not be recorded, reproduced, retransmitted, rebroadcast, downloaded or usually employed with no PVH's convey created permission. Your participation from the dilemma and response session constitutes your consent to have any remarks or statements you make show up on any transcripts or broadcast of the get in touch with. The knowledge designed readily available on this webcast and convention connect with has certain ahead wanting statements which replicate PVH's watch of upcoming situations and fiscal effectiveness as of December three, 2007. Any these ahead hunting statements are issue to pitfalls and uncertainties indicated every so often within the firm's SEC filings. Hence, the firm's long term final results of functions could vary materially from historic final results or latest anticipations, as a lot more thoroughly reviewed in our SEC filings. The organization isn't going to undertake any obligation to update publicly any forward looking assertion, together with without the need of limitation any estimate concerning revenues or earnings. The information made accessible also features particular non GAAP economic measures as described underneath SEC rules. Now for opening remarks and introductions, I would choose to convert the decision above to Manny Chirico. Thanks very substantially. Superior morning, everyone. First of all, I would identical to to apologize for the confusion we experienced together with the meeting phone amount. I feel that is all been resolved. We now have about 115 people about the phone so I believe clearly the term got out regarding the misprint within the push release. I'd just like to convey joining me on the connect with is Allen Sirkin our President and Chief Operating Officer; Mike Shaffer, our Chief Economical Officer; and Pam Hootkin, our Senior Vice chairman, Treasurer, and Director of Trader Relations. Concentrating in to the quarter, offered the difficult retail atmosphere that we are dealing with plus some from the macroeconomic issues that were also issues we're dealing with, we have been quite pleased while using the effects for that third quarter. Let me attempt for getting into just about every of our organizations independently. I will start off with Calvin Klein. Our licensing company posted a 25% enhance in royalty revenues in the 3rd quarter and almost a 30% maximize in running earnings. Just to start off with, I assume the emphasize fort the quarter for Calvin Klein was the Calvin Klein week at Macy's. It absolutely was a significant achievement, equally from a advertising and marketing standpoint and from your viewpoint of driving regular priced promoting via the Macy's doorways. Our Macy's organization through that stretch of time throughout the board was up about 10% which was inside of a really tricky surroundings when it absolutely was unseasonably heat climate, so plainly we felt that it absolutely was a significant achievements for us, both from the manufacturer standpoint and from the point of view of driving small business Calvin Klein Womens Underwear. Investigating our person organizations, our fragrance small business ongoing to write-up strong development Calvin Klein Hip Briefs. We had a 30% maximize in the third quarter. That continued to be pushed via the strength of your Euphoria franchise. That enterprise, each men's and women's, carries on to improve. It is up substantial double digits from the mid teenagers selection. Our CKIN2U enterprise, which introduced inside the spring of 2007, continued its strong advancement, significantly internationally. The CK model internationally is really a key stone for us from a branded perspective. That small business this yr total ought to technique amongst $130 million and $140 million in wholesale profits for our licensee, Coty, and the start of Calvin Klein Guy was quite favourable in the United states of america. We started out transport that product in September. It was released in Macy's beginning while using the Calvin Klein week and providing has long been pretty sturdy through October and as we roll in to the vacation year, that manufacturer proceeds to perform quite that start proceeds to perform quite well for us. So in general, fragrance a huge small business for us, continues to improve really, very very well. Relocating to Warnaco, our underwear organization posted a 30% enhance in royalties for the quarter. Powerful growth with all the launch on the new metal item, coupled with just an awesome marketing and advertising marketing campaign showcasing [Djimon Hounsou]. That enterprise carries on to try and do very properly for us. We have gotten excellent testimonials to the solution and also the marketing connected together with the metal launch. There carries on to get extremely sturdy expansion to the women's aspect with our flawlessly healthy bra business Calvin Klein Womens Boxer. That company carries on to mature each domestically and global. almost 20% and worldwide, the organization grew about 40%. The worldwide development was fueled by new products but in addition fueled with the continued opening of Calvin Klein underwear shops within the world, notably during Asia. Our jeans business enterprise was seriously pushed with the intercontinental element of that. Our international jeans company over-all was up about 20%. business enterprise was fairly flat. It was up 2% to the third quarter though the denims company internationally, specially Asia and also Europe, up about 20%. Quite solid company there, also a continuation of opening doors all through Europe and Asia less than the Calvin Klein denims overall banner. Enterprise is up about 25%. Our effectiveness proceeds to be very solid. We are one particular on the leading performers inside the outerwear class, specifically at Macy's. Women's fits and gown organization carries on to increase very well and proceeds to become a real emphasize for us. So over-all, we were really satisfied with the Calvin Klein organization developing 25% all round over the best line and about 30% on the base line. The sole business enterprise that proceeds to struggle for us from a licensing perspective is our women's sportswear small business. We're beginning to discover some far better provide throughs there and a few far better positioning but nevertheless not anywhere achieving our aims and targets for that small business and we think it is a chance as we glance out more than the next 24 months that that enterprise continues to generally be repositioned and grown. Going to our running corporations, our mixed retail and wholesale small business has posted a 22% gross sales enhance as well as a 16% enhance in functioning earnings. Enable me begin with our heritage business enterprise costume shirts. Costume shirts had a very strong quarter both equally from the revenue in addition to a margin point of view. The organization continues to run in advance of sales strategies and our average unit retails are significantly better than past yr, which assists to boost our over-all margins and it has improved the overall profitability on the business. The business as we go into your fourth quarter of the yr, the costume shirt business enterprise proceeds to accomplish extremely strongly and margins carry on to hold up very positively. Within the neckwear division, our Superba acquisition is exceeding all of our expectations. The business is running nicely ahead of all of our first designs. We think that the acquisition will likely have earnings accretion to the 12 months of about $10 million pretax. Which is well worth $0.ten to about $0.eleven a share and it is drastically greater than our primary anticipations and perhaps higher in comparison to the up to date advice we gave in the second quarter. So we actually feel fantastic about how that organization is built-in in. We're observing really sturdy promoting. We carry on to enhance the margin by sourcing moves that we make in the organization, so we're extremely satisfied with that, exactly where that company, the synergies with dress shirts has appear throughout. Over the Calvin Klein companies that we run ourselves, on the men's sportswear aspect, that enterprise proceeds to perform exceedingly well. We are operating effectively in advance of previous calendar year and they are on approach for the fourth quarter. At department stores, Calvin proceeds for being one of the best executing men's selection sportswear companies any time you measure it with a profits for every sq. foot basis as well as a maintain gross margin business. In order that organization carries on to exceed our programs, continues to provide. We're in well about 500 doors. I believe it is really 550 doors right now and we proceed to garner square footage in existing significant doors that we manage, so we've been really joyful together with the overall performance of that business enterprise. Our Calvin Klein retail outlet company had an exceptionally potent quarter. Comps in the Calvin Klein small business have been up nearly 10% to the 3rd quarter. That craze continues, remaining up for the fourth quarter and early with the thirty day period of November, our comps while in the Calvin Klein business are up about 8%, so we really feel excellent in regards to the Calvin Klein retail organizations. Margins are working forward of strategy, profitability working in advance of plan quite positive about that. And a single with the corporations that we released during the 3rd quarter of this 12 months, the IZOD women's business has gotten off to your superb get started. The business enterprise will ship about $30 million while in the next half of this calendar year and we're estimating future 12 months that product sales are going to be in extra of $60 million as we go into your calendar year. Besides enduring quite potent promote ins, we've been getting good provide throughs. On this tough retail atmosphere, our sell throughs are already good and have been on program, making sure that organization is basically exceeding the first estimates that we put on it and we truly feel excellent regarding how it goes into 2008. The two organizations which are seriously getting additional impacted to us through the overall ecosystem are our average sportswear business enterprise and our heritage outlet organizations, and that i believe it clearly from the aggressive established perspective, both equally of all those business enterprise groups are outperforming the level of competition. Our reasonable models, Van Heusen, Arrow, and Bass and to a a great deal constrained extent, substantial IZOD are increasingly being impacted from the tough environment in the third quarter. During the third quarter, the unseasonably heat weather conditions in September and Oct impacted our wholesale sportswear companies. From a margin viewpoint, we saw some price tag compression and marketing and we handled that. In addition, it impacted us from the inside our retail merchants from the comp keep standpoint, offered the traits that we had been experiencing. Our comp merchants within our heritage organization for that 3rd quarter were being down about 2%. Total, our comps for your 3rd quarter were up 1% merged with Calvin Klein but our heritage small business was down about 2%. Gross margins all round from both wholesale and retail any time you look at our firms, was down about two hundred basis factors overall and that's seriously dealing along with the surroundings as well as the promotional marketing that's set up. As we switch to the fourth quarter for these two enterprises, we're preparing our organization along with the estimates that we place collectively are organizing for an intense fourth quarter advertising natural environment. We have experienced the markdowns within our plan. We come to feel extremely cozy with that. Our allowances are inside our system. We feel extremely at ease with that, so we really feel we've been nicely positioned from a listing perspective and we have been properly positioned from suitable markdown allowances and markdowns at retail that we need to consider.