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PVH Corp. (PVH - Free Report) reported second-quarter fiscal 2024 results, wherein both earnings and revenues topped the Zacks Consensus Estimate. The bottom line significantly improved while the top line fell year over year. Results gained from the strong execution of the PVH+ Plan, which led to robust gross margin expansion and double-digit adjusted earnings per share (EPS) growth.
PVH reported adjusted earnings of $3.01 per share, up 52.0% from the year-ago quarter's $1.98. The bottom line also beat the Zacks Consensus Estimate of earnings of $2.27 per share and the company’s guidance of $2.25.
Revenues fell 6% year over year (down 5% at constant currency) to $2,074 million but beat the consensus mark of $2,068 million.
The company's international businesses saw a 4% decrease in revenues (down 3% on a constant currency basis), mostly due to the challenging consumer environment in Asia Pacific, particularly in China and Australia. Additionally, it has been strategically reducing sales in Europe to improve overall sales quality in the region. In North America, combined revenues for the Tommy Hilfiger and Calvin Klein brands saw a rise of 1% from the previous year.
Direct-to-consumer revenues declined 5% from the prior-year period (down 3% on a constant-currency basis). Revenues in the company’s owned and operated physical stores fell 4% year over year (3% on a constant currency basis). This decrease was largely due to recent softness in the consumer market. The digital commerce unit of the owned and operated stores decreased 6% (5% on a constant-currency basis) year over year, mainly due to reduced sales in Europe.
Wholesale revenues fell 9% from the prior-year period (down 8% on a constant-currency basis). The decline was largely due to a 7% reduction in sales of the Heritage Brands women's intimates business. The remaining decline was attributed to the company’s ongoing strategic effort to reduce wholesale revenues in Europe.
The company's gross profit of $1.2 billion dipped 2.1% year over year. The gross margin expanded 250 bps to 60.1% on gains from lower product costs, a favorable shift in channel mix and a fall in sales to lower-margin wholesale accounts.
Selling, general and administrative expenses dipped 4.8% year over year to $1.08 billion.
The company’s adjusted earnings before interest and taxes totaled $173.9 million, up 21.4% from the prior-year quarter.
PVH’s Segmental Analysis
Revenues for the Calvin Klein segment were down 1% year over year (flat on a constant currency basis). The segment recorded a 2% sales decline (flat in constant currency) at Calvin Klein International and 1% increase at Calvin Klein North America.
Revenues for the Tommy Hilfiger brand dropped 4% year over year (down 3% in constant currency). Revenues fell 6% (down 5% in constant currency) in Tommy Hilfiger International, mostly due to reduced sales in Europe.
The Heritage Brands segment's revenues plunged 60% year over year. This included a 56% year-over-year decline in the sale of the Heritage Brands women's intimates business.
A Closer Look at PVH's Financial Performance
PVH ended the fiscal second quarter with cash and cash equivalents of $0.6 billion, long-term debt of $1.7 billion and stockholders' equity of $5.2 billion.
In alignment with the PVH+ Plan's objective to return excess cash to shareholders, the company executed the repurchase of 2.0 million shares of its common stock, amounting to $25 million. It expects to repurchase shares of $400 million for the fiscal year 2024.
PVH’s Guidance
For the third quarter, revenues are projected to decline in the range of 6-7% (down 7-8% in constant currency) from the year-ago quarter, including a 2% reduction related to the Heritage Brands sale.
EPS, on a non-GAAP basis, is expected to be $2.50 compared with $2.90 in the year-ago quarter. This view includes an unfavorable currency impact of 5 cents per share. EPS, on a GAAP basis, is expected to be $2.30 compared with $2.66 in the year-ago quarter.
For fiscal 2024, the company anticipates a year-over-year revenue decline in the range of 6-7%, which is consistent on a constant currency basis. This includes a 2% reduction due to the divestiture of the Heritage Brands women’s intimates business and a 1% impact from the 53rd week in fiscal 2023.
PVH expects the adjusted operating margin to be nearly flat compared with 10.1% in fiscal 2023. On a GAAP basis, the operating margin is likely to be about 9.8%, down from the 10.1% projected earlier.
Management now envisions non-GAAP EPS in the range of $11.55-$11.80 compared with the earlier view of $11-$11.25. GAAP EPS is expected to be in the band of $11.20-$11.45 compared with the prior guidance of $11.15-$11.40. The company recorded non-GAAP EPS of $10.68 and GAAP EPS of $10.76 in fiscal 2023. The EPS guidance for fiscal 2024 includes a negative impact of around 5 cents per share from currency movements.
Shares of this Zacks Rank #3 (Hold) company have declined 15.4% in the past three months compared to the industry’s 1.5% decline.
Wolverine World Wide designs, manufactures and distributes a wide variety of casual and active apparel and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can seethe complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WWW’s current financial-year sales indicates a decline of almost 23% from the year-ago reported figure. The consensus mark for EPS is pegged at 85 cents, up from 5 cents reported in the prior year. WWW has a trailing four-quarter earnings surprise of 7.5%, on average.
Kontoor Brands is a lifestyle apparel company that designs, produces, distributes and licenses denim, apparel, footwear and accessories under the Wrangler and Lee brands. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for KTB’s 2024 earnings and sales indicates growth of 12.7% and 0.1%, respectively, from the 2023 reported figures. KTB has a trailing four-quarter earnings surprise of 12.3%, on average.
Funko, a pop culture consumer products company, currently carries a Zacks Rank of 2. FNKO has a trailing four-quarter earnings surprise of 87.6%, on average.
The Zacks Consensus Estimate for Funko’s current financial-year sales indicates a decline of 1.7% from the year-ago reported figure. The consensus mark for earnings is pegged at break-even compared with a loss of 87 cents per share in the prior year.
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PVH Raises EPS View on Q2 Earnings Beat Despite Soft Revenues
PVH Corp. (PVH - Free Report) reported second-quarter fiscal 2024 results, wherein both earnings and revenues topped the Zacks Consensus Estimate. The bottom line significantly improved while the top line fell year over year. Results gained from the strong execution of the PVH+ Plan, which led to robust gross margin expansion and double-digit adjusted earnings per share (EPS) growth.
PVH Corp. Price, Consensus and EPS Surprise
PVH Corp. price-consensus-eps-surprise-chart | PVH Corp. Quote
Let’s Delve Deeper Into PVH’s Q2 Performance
PVH reported adjusted earnings of $3.01 per share, up 52.0% from the year-ago quarter's $1.98. The bottom line also beat the Zacks Consensus Estimate of earnings of $2.27 per share and the company’s guidance of $2.25.
Revenues fell 6% year over year (down 5% at constant currency) to $2,074 million but beat the consensus mark of $2,068 million.
The company's international businesses saw a 4% decrease in revenues (down 3% on a constant currency basis), mostly due to the challenging consumer environment in Asia Pacific, particularly in China and Australia. Additionally, it has been strategically reducing sales in Europe to improve overall sales quality in the region. In North America, combined revenues for the Tommy Hilfiger and Calvin Klein brands saw a rise of 1% from the previous year.
Direct-to-consumer revenues declined 5% from the prior-year period (down 3% on a constant-currency basis). Revenues in the company’s owned and operated physical stores fell 4% year over year (3% on a constant currency basis). This decrease was largely due to recent softness in the consumer market. The digital commerce unit of the owned and operated stores decreased 6% (5% on a constant-currency basis) year over year, mainly due to reduced sales in Europe.
Wholesale revenues fell 9% from the prior-year period (down 8% on a constant-currency basis). The decline was largely due to a 7% reduction in sales of the Heritage Brands women's intimates business. The remaining decline was attributed to the company’s ongoing strategic effort to reduce wholesale revenues in Europe.
The company's gross profit of $1.2 billion dipped 2.1% year over year. The gross margin expanded 250 bps to 60.1% on gains from lower product costs, a favorable shift in channel mix and a fall in sales to lower-margin wholesale accounts.
Selling, general and administrative expenses dipped 4.8% year over year to $1.08 billion.
The company’s adjusted earnings before interest and taxes totaled $173.9 million, up 21.4% from the prior-year quarter.
PVH’s Segmental Analysis
Revenues for the Calvin Klein segment were down 1% year over year (flat on a constant currency basis). The segment recorded a 2% sales decline (flat in constant currency) at Calvin Klein International and 1% increase at Calvin Klein North America.
Revenues for the Tommy Hilfiger brand dropped 4% year over year (down 3% in constant currency). Revenues fell 6% (down 5% in constant currency) in Tommy Hilfiger International, mostly due to reduced sales in Europe.
The Heritage Brands segment's revenues plunged 60% year over year. This included a 56% year-over-year decline in the sale of the Heritage Brands women's intimates business.
A Closer Look at PVH's Financial Performance
PVH ended the fiscal second quarter with cash and cash equivalents of $0.6 billion, long-term debt of $1.7 billion and stockholders' equity of $5.2 billion.
In alignment with the PVH+ Plan's objective to return excess cash to shareholders, the company executed the repurchase of 2.0 million shares of its common stock, amounting to $25 million. It expects to repurchase shares of $400 million for the fiscal year 2024.
PVH’s Guidance
For the third quarter, revenues are projected to decline in the range of 6-7% (down 7-8% in constant currency) from the year-ago quarter, including a 2% reduction related to the Heritage Brands sale.
EPS, on a non-GAAP basis, is expected to be $2.50 compared with $2.90 in the year-ago quarter. This view includes an unfavorable currency impact of 5 cents per share. EPS, on a GAAP basis, is expected to be $2.30 compared with $2.66 in the year-ago quarter.
For fiscal 2024, the company anticipates a year-over-year revenue decline in the range of 6-7%, which is consistent on a constant currency basis. This includes a 2% reduction due to the divestiture of the Heritage Brands women’s intimates business and a 1% impact from the 53rd week in fiscal 2023.
PVH expects the adjusted operating margin to be nearly flat compared with 10.1% in fiscal 2023. On a GAAP basis, the operating margin is likely to be about 9.8%, down from the 10.1% projected earlier.
Management now envisions non-GAAP EPS in the range of $11.55-$11.80 compared with the earlier view of $11-$11.25. GAAP EPS is expected to be in the band of $11.20-$11.45 compared with the prior guidance of $11.15-$11.40. The company recorded non-GAAP EPS of $10.68 and GAAP EPS of $10.76 in fiscal 2023. The EPS guidance for fiscal 2024 includes a negative impact of around 5 cents per share from currency movements.
Shares of this Zacks Rank #3 (Hold) company have declined 15.4% in the past three months compared to the industry’s 1.5% decline.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks are Wolverine World Wide (WWW - Free Report) , Kontoor Brands Inc. (KTB - Free Report) and Funko, Inc. (FNKO - Free Report) .
Wolverine World Wide designs, manufactures and distributes a wide variety of casual and active apparel and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for WWW’s current financial-year sales indicates a decline of almost 23% from the year-ago reported figure. The consensus mark for EPS is pegged at 85 cents, up from 5 cents reported in the prior year. WWW has a trailing four-quarter earnings surprise of 7.5%, on average.
Kontoor Brands is a lifestyle apparel company that designs, produces, distributes and licenses denim, apparel, footwear and accessories under the Wrangler and Lee brands. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for KTB’s 2024 earnings and sales indicates growth of 12.7% and 0.1%, respectively, from the 2023 reported figures. KTB has a trailing four-quarter earnings surprise of 12.3%, on average.
Funko, a pop culture consumer products company, currently carries a Zacks Rank of 2. FNKO has a trailing four-quarter earnings surprise of 87.6%, on average.
The Zacks Consensus Estimate for Funko’s current financial-year sales indicates a decline of 1.7% from the year-ago reported figure. The consensus mark for earnings is pegged at break-even compared with a loss of 87 cents per share in the prior year.