PVH Corporation PVH posted solid first-quarter fiscal 2023 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and grew year over year. Results gained from strong execution of the PVH+ Plan and continued momentum in its core brands — Calvin Klein and Tommy Hilfiger. The company continues to manage expenses, driving cost efficiencies.
In the past three months, this Zacks Rank #2 (Buy) stock has gained 4.5% against the industry's decline of 5.4%.
PVH Corp reported adjusted earnings of $2.14 per share, up 10% from the year-ago quarter's $1.94. Also, the bottom line beat the Zacks Consensus Estimate of $1.93.
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In the fiscal first quarter, revenues rose 2% year over year (up 5% on a constant-currency or cc basis) to $2,158 million and surpassed the consensus mark of $2,129 million. This is mainly driven by the solid performance in its international businesses, particularly in the Asia Pacific region, continued growth in Europe and the North America direct-to-consumer business.
Direct-to-consumer revenues grew 8% year over year in the quarter, whereas Wholesale revenues fell 2% year over year. Revenues in the digital channel declined roughly 3% in the quarter under review.
The company's gross profit amounted to $1,250.3 million, up 0.9% year over year and surpassed our estimate of $1,240.8 million. The gross margin contracted 50 bps to 57.9% due to price increases, lower freight costs, and a favorable shift in regional and channel mix, which more than offset higher product costs and elevated inventory costs.
Selling, general and administrative expenses increased 2.4% year over year to $1,064 million. Earnings before interest and taxes totaled $199 million compared with $210 million in the prior-year quarter and our estimate of $252 million. This is mainly due to lower gross margins stemming from inventory costs. The metric also included $9 million of adverse foreign currency impacts.
PVH Corp reports financial results under three segments — Calvin Klein, Tommy Hilfiger and Heritage Brands.
Revenues from the Calvin Klein segment moved up 1.3% year over year. Sales from Calvin Klein North America advanced 11.4%, while the same for Calvin Klein International rose 7.1%.
Revenues from the Tommy Hilfiger segment grew 5.2% year over year in the reported quarter. Revenues were up 13.2% at Tommy Hilfiger North America and the same rose 2.8% at Tommy Hilfiger International.
The Heritage Brands segment's revenues plunged 12% year over year in the quarter under review.
PVH Corp ended the quarter with cash and cash equivalents of $373.8 million, long-term debt of $2,193 million, and stockholders' equity of $5,126.4 million.
PVH Corp. Price, Consensus and EPS Surprise
PVH Corp. price-consensus-eps-surprise-chart | PVH Corp. Quote
Management issued its second-quarter and fiscal 2023 views. For fiscal 2023, revenues are anticipated to grow 3-4% (up 2-3% on a cc basis). This is in sync with our estimate.
The bottom line is expected to be $10 for the year, whereas it reported $3.03 on a GAAP basis and $8.97 on an adjusted basis last year. The view includes a positive impact of 15 cents from favorable currency.
The operating margin is estimated to be 10%. Interest expenses are likely to be $100 million, suggesting an increase from the prior year’s reported figure of $83 million due to higher interest rates. Also, the effective tax rate is expected to be 24%.
For second-quarter fiscal 2023, management expects revenue growth in the low-single digits. The bottom line is likely to be $1.70, whereas it reported $1.72 in the year-ago quarter on a GAAP basis and $2.08 on an adjusted basis. This includes favorable currency impacts of 5 cents. Interest expenses for the fiscal first quarter are likely to be $25 million, whereas it posted $20 million in the year-ago period. The effective tax rate is expected to be 26%.
Other Stocks to Consider
Some other top-ranked companies are Crocs CROX, Royal Caribbean RCL and MGM Resorts MGM.
MGM Resorts currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 81%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates increases of 2.2% and 31%, respectively, from those estimated for 2023.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
Crocs, which offers casual lifestyle footwear and accessories, presently carries a Zacks Rank #2. The expected EPS growth rate for three to five years is 15%.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 13.1% and 2.8% from the year-ago period’s reported figure. CROX has a trailing four-quarter earnings surprise of 21.8%, on average.
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