Yahoo Finance PVH (PVH) Up 0.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for PVH (PVH). Shares have added about 0.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is PVH due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
PVH Q4 Earnings Beat Estimates, Revenues Flat Y/Y
PVH Corp. reported improved fourth-quarter fiscal 2023 results, wherein both earnings and sales topped estimates. The bottom line improved while the top line remained flat year over year.
Results gained from the strong execution of the PVH+ Plan, which led to a strong gross margin expansion and double-digit adjusted earnings per share (EPS) growth in the fiscal fourth quarter. Additionally, the company witnessed continued momentum in its core brands, Calvin Klein and Tommy Hilfiger.
Q4 Highlights
PVH Corp. reported adjusted earnings of $3.72 per share, up 56.3% from the year-ago quarter's $2.38. The bottom line also beat the Zacks Consensus Estimate of $3.51 per share.
In the fiscal fourth quarter, revenues remained flat year over year (down 1% on a constant currency) at $2,489.9 million, beating the consensus mark of $2,413 million.
The company's international businesses saw a 4% increase in revenues year over year, driven primarily by robust growth across all markets in the Asia Pacific region.
This growth helped counterbalance the ongoing macroeconomic challenges in Europe, which particularly affected the wholesale business. In North America, combined revenues for the Tommy Hilfiger and Calvin Klein brands saw a slight decrease of 2% compared withs the previous year.
Direct-to-consumer revenues experienced a significant uplift, growing 9% compared with the prior year (also 9% on a constant currency basis). This growth was consistent across all regions, evident in both the company's owned and operated stores and its digital commerce operations. The digital commerce segment of the owned and operated stores specifically grew 10% (9% on a constant currency basis) year over year.
Wholesale revenues witnessed a 10% decrease compared with the previous year (12% decrease on a constant currency basis), which includes a 3% reduction attributable to the sale of the Heritage Brands women's intimates business. This underscores the ongoing cautious stance of wholesale customers.
Total digital revenues saw a modest increase of 1% over the prior year (with a 1% decrease on a constant currency basis). The notable growth in the company's digital commerce business was somewhat mitigated by a decrease in wholesale sales to traditional retailers’ e-commerce platforms and pure players. Digital sales accounted for approximately 20% of the total revenues, indicating the significant role of digital channels in the company's revenue stream.
The company's gross profit of $1.501 billion improved 8% year over year. The gross margin expanded 440 bps to 60.3% on gains from lower freight costs, a favorable shift in regional and channel mix, and lower product costs. We estimated the fiscal fourth-quarter gross margin to expand 420 bps year over year to 60.1%.
Selling, general and administrative expenses rose 2.8% year over year to $1.216 billion.
The company’s adjusted earnings before interest and taxes (EBIT) totaled $301 million, up 40% from the prior-year quarter. Robust adjusted EBIT growth was driven by gross margin expansion.
The company is on track with its disciplined cost-management actions, which are resulting in cost efficiencies. Additionally, the company’s take on expense management supports its target of making investments to aid its strategic initiatives.
Segmental Analysis
PVH Corp. reports financial results under three segments, which are Calvin Klein, Tommy Hilfiger and Heritage Brands.
Revenues for the Calvin Klein segment rose 4% year over year (up 3% in constant currency). The rise was aided by 12% sales growth (up 10% in constant currency) at Calvin Klein International, partly offset by an 8% decline at Calvin Klein North America due to a decrease in the wholesale business.
Revenues for the Tommy Hilfiger brand grew 1% year over year (down 1% in constant currency) in the reported quarter. Revenue growth was 4% in Tommy Hilfiger North America, offset by a 1% decline (down 3% in constant currency) in Tommy Hilfiger International.
The Heritage Brands segment's revenues declined 41% year over year in the quarter under review. This included a 30% year-over-year decline in the sale of the Heritage Brands women's intimates business.
Other Financial Details
PVH Corp. ended the fiscal fourth quarter with cash and cash equivalents of $707.6 million, long-term debt of $1.592 billion and stockholders' equity of $5.119 billion. In alignment with the PVH+ Plan's objective to return excess cash to shareholders, the company executed the repurchase of 2.5 million shares of its common stock, amounting to $282 million during the fourth quarter of fiscal 2023.
This initiative culminated in a total of 5.7 million shares repurchased over fiscal 2023, representing an investment of $550 million. Reinforcing this commitment, on Mar 27, 2024, the company's board of directors approved a significant expansion of the stock repurchase program by $2 billion, extending its duration through July 2028.
Outlook
For first-quarter fiscal 2024, revenues are projected to witness an approximate 11% decrease from the first quarter of 2023, including a 3% reduction related to the Heritage Brands sale, illustrating early-year challenges and the impact of strategic divestitures.
EPS, on a GAAP basis, is expected to be $2.15 compared with $2.14 reported in the year-ago quarter. This view includes unfavorable currency impacts of 5 cents per share.
Interest expenses for the fiscal first quarter are estimated to be $20 million compared with $22 million in the year-ago period. The effective tax rate is expected to be 21%.
For fiscal 2024, the company anticipates a revenue decline of 6% to 7% in comparison with 2023, consistent on a constant currency basis.
This anticipated decrease factors in a 2% reduction due to the divestiture of the Heritage Brands women’s intimates business and a 1% impact from the additional 53rd week in 2023, highlighting the influence of strategic business decisions and calendar variations on revenue streams.
The company expects GAAP EPS to be in the range between $10.75 and $11.00, showing a stable outlook compared with $10.76 on a GAAP basis and $10.68 on a non-GAAP basis in fiscal 2023. The EPS guidance includes a negative impact of 10 cents per share from unfavorable currency.
How Have Estimates Been Moving Since Then?
Estimates revision followed an upward path over the past two months.
The consensus estimate has shifted -16.82% due to these changes.
VGM Scores
At this time, PVH has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
PVH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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PVH Corp. (PVH) : Free Stock Analysis Report
