(Reuters) - Clothing maker PVH Corp (PVH.N) raised its full-year earnings outlook for the third time this year, as it expects its European business to grow and its flagship Tommy Hilfiger brand to remain popular with shoppers.
Shares of the company, also known for its Calvin Klein brand, rose 6 percent to $93.45 in after-market trade. The stock, which has gained a quarter of its value this year, closed at $88.49 on the New York Stock Exchange on Monday.
PVH, which was started in 1881 to sell and mend shirts for miners in Pottsville, Pennsylvania, said it expects margin to grow as it benefits from lower raw material costs.
C.L. King & Associates Inc analyst Steven Marotta said a fall in cotton prices in the second half of the year will benefit the company’s gross margins.
The company’s operating margins had been shrinking since 2010 due to higher raw material costs. PVH had last raised its full-year profit outlook in May saying it expects margin pressures from high product costs to ease in the second half of the year.
The company, which competes with Ralph Lauren Corp (RL.N), Perry Ellis International Inc (PERY.O) and Michael Kors Holdings Ltd (KORS.N), also raised prices of Tommy Hilfiger products in the quarter, beefing up profits.
“Having pricing power is good in any environment. In this environment, it is even better,” analyst Marotta said.
Revenue from its Tommy Hilfiger business, which constitutes more than half of its revenue, rose 4 percent to $721.9 million.
Analyst Marotta said comparable store sales in Europe improved in the quarter indicating that the company is operating well in a difficult environment.
European comparable store sales were up 15 percent, while European wholesale business rose 9 percent.
The company, which also owns Arrow and Izod labels, had said in June that it may exceed its prior expectations if current business trends continue.
PVH now expects to earn about $6.25 to $6.32 per share for the year, up from $5.90 to $6.00 per share it first forecast in January.
Analysts were expecting PVH to earn $6.22 per share for the full year, according to Thomson Reuters I/B/E/S.
PVH also forecast current-quarter profit of between $2.20 and $2.25 per share, compared with estimates of $2.20 per share.
Second-quarter profit rose to $87.7 million, or $1.19 per share, from $66.7 million, or 92 cents per share, a year earlier.
On an adjusted basis, the company earned $1.25 in the quarter, beating analysts’ expectations of $1.20 per share.
Revenue at New York-based PVH, which shortened its name from Phillips-Van Heusen Corp last year, was relatively flat at $1.34 billion, in line with Street estimates.
Reporting by Arpita Mukherjee in Bangalore; Editing by Supantha Mukherjee