It has been about a month since the last earnings report for PVH (PVH). Shares have lost about 10.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is PVH due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
PVH Corp Q2 Earnings & Revenues Surpass Estimates
PVH Corp posted solid second-quarter fiscal 2023 results. The bottom and top lines surpassed the Zacks Consensus Estimate. Results gained from the strong execution of the PVH+ Plan and the continued momentum in its core brands — Calvin Klein and Tommy Hilfiger. The company witnessed double-digit revenue growth in its direct-to-consumer business in stores and online.
PVH Corp reported adjusted earnings of $1.98 per share, down 4.8% from the year-ago quarter's $1.94. However, the bottom line beat the Zacks Consensus Estimate of $1.75.
In the fiscal second quarter, revenues rose 4% year over year (up 2% on a constant-currency or cc basis) to $2,207 million and surpassed the consensus mark of $2,186 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 11% year over year in the quarter, whereas Wholesale revenues fell 3% year over year. Revenues in the digital channel declined roughly 10% in the quarter under review.
The company's gross profit amounted to $1,272.3 million, up 4.3% year over year, surpassing our estimate of $1,267.2 million. The gross margin contracted 40 bps to 57.6% due to price increases, lower freight costs, and a favorable shift in regional and channel mix, which more than offset elevated inventory costs stemming from adverse currency.
Selling, general and administrative expenses increased 7.8% year over year to $1,099.5 million but lagged our estimate of $1,107.9.
The company’s adjusted earnings before interest and taxes totaled $182 million compared with $211 million in the prior-year quarter. Notably, our estimate was pegged at $253.2 million. This is mainly due to higher inventory costs and increased investments to support the company’s strategic initiatives. The metric also included $5 million of favorable 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 3% year over year. Sales from Calvin Klein North America fell 9%, while the same for Calvin Klein International rose 11%.
Revenues from the Tommy Hilfiger segment grew 6% year over year in the reported quarter. Revenues were up 6% at Tommy Hilfiger North America and the same rose 6% at Tommy Hilfiger International.
The Heritage Brands segment's revenues plunged 11% year over year in the quarter under review.
PVH Corp ended the quarter with cash and cash equivalents of $372.8 million, long-term debt of $1,619.6 million, and stockholders' equity of $5,037.6 million. In the quarter, the company repurchased 2.4 million shares for $200 million. It expects to repurchase up to $400 million of stock in 2023.
Management issued its third-quarter and revised its fiscal 2023 view. For fiscal 2023, revenues are anticipated to grow 3-4% (up 2-3% on a cc basis). This is in sync with our estimate of 3.1% growth.
The bottom line is expected to be $9.60, down from the earlier stated $10. Adjusted earnings are envisioned to be $10.35, up from the prior mentioned $10. Meanwhile, it reported $3.03 on a GAAP basis and $8.97 on an adjusted basis last year. Each guidance includes a positive impact of 15 cents from favorable currency. The company also expects double-digit growth in the EBIT margin.
Interest expenses are likely to be $100 million, suggesting an increase from the prior-year reported figure of $83 million due to higher interest rates. Also, the effective tax rate is expected to be 22%.
For third-quarter fiscal 2023, management expects revenue growth in the mid-single digits. The bottom line is likely to be $2.43, whereas it reported a loss of $2.88 in the year-ago quarter on a GAAP basis. Adjusted earnings are likely to be $2.70, whereas it reported $2.6 on an adjusted basis. This view includes favorable currency impacts of 15 cents.
Interest expenses for the fiscal third quarter are likely to be $25 million, whereas the company posted $19 million in the year-ago period. The effective tax rate is expected to be 22%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
The consensus estimate has shifted -6% due to these changes.
At this time, PVH has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PVH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report