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PVH Corporation (PVH - Free Report) reported better-than-expected results in the third quarter of fiscal 2024, wherein both earnings and revenues topped the Zacks Consensus Estimate. The bottom line 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 growth in adjusted earnings per share (EPS).
However, shares of this apparel designer lost more than 6% in after-hours trading yesterday. This is likely to have been due to a decline in revenues in the fiscal third quarter and soft guidance for the fiscal fourth quarter. Also, management cut the upper-end view for EPS for fiscal 2024.
Let’s Delve Deeper Into PVH’s Q3 Performance
PVH reported adjusted earnings of $3.03 per share, up 4.5% from the year-ago quarter's $2.90. The bottom line also beat the Zacks Consensus Estimate of earnings of $2.61 per share and the company’s guidance of $2.50. The figure included the positive impacts of foreign currency translations of 5 cents a share.
Revenues fell 5% year over year (down 6% at constant currency) to $2,255 million but beat the consensus mark of $2,228 million. Management had guided a revenue decline of 6-7% and 7-8% on a constant currency basis. This included a 2% drop from the sale of the Heritage Brands women’s intimates business last year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The company's international businesses saw a 0.4% rise in revenues (down 1.8% on a constant currency basis). Growth in Asia Pacific in local currency was more than compensated by the strategic reduction of 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 dip of 6% from the previous year.
Direct-to-consumer revenues climbed 0.4% from the prior-year period (down 1% on a constant-currency basis). Revenues in the company’s owned and operated physical stores rose 0.7% year over year (down 0.7% on a constant currency basis). The digital commerce unit of the owned and operated stores decreased 0.9% (2.6% on a constant-currency basis) year over year, mainly due to reduced sales in Europe.
Wholesale revenues fell 7.6% from the prior-year period (down 9.1% on a constant-currency basis). The decline was largely due to a 4% decline in sales of the Heritage Brands women's intimates business. The remaining decline was attributed to its ongoing strategic effort to reduce wholesale revenues in Europe.
The company's gross profit of $1.3 billion dipped 1.5% year over year. The gross margin expanded 170 bps to 58.4% due to a favorable shift in channel mix and a fall in sales to low-margin wholesale accounts.
Selling, general and administrative expenses rose 9.1% year over year to $1.2 billion.
The company’s adjusted earnings before interest and taxes totaled $236 million, down 5.2% from the prior-year quarter.
PVH’s Segmental Analysis
Revenues for the Calvin Klein segment were down 2.8% year over year (down 3.9% on a constant currency basis). The segment recorded a 0.8% jump (down 0.9% in constant currency) at Calvin Klein International and 9% decrease at Calvin Klein North America mainly due to the timing of wholesale shipments.
Revenues for the Tommy Hilfiger brand dropped 0.7% year over year (down 2.4% in constant currency). Revenues were flat year over year (down 2.4% in constant currency) in Tommy Hilfiger International, mostly due to reduced sales in Europe. Revenues at Tommy Hilfiger North America dipped 3% year over year.
The Heritage Brands segment's revenues plunged 54% year over year. This included a 44% 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 third quarter with cash and cash equivalents of $0.6 billion, long-term debt of $1.7 billion and stockholders' equity of $5.3 billion.
In alignment with the PVH+ Plan's objective to return excess cash to shareholders, the company executed the repurchase of 300,000 shares of its common stock, amounting to $29 million in the reported quarter. It made a total share repurchase of 2.4 million shares for $254 million in the nine months of fiscal 2024. Management anticipates repurchasing shares of $400 million for the fiscal year 2024.
What to Expect From PVH in Q4 & FY24
For the fourth quarter, revenues are projected to decline in the range of 6-7% (down 4-5% in constant currency) from the year-ago quarter, including a 1% reduction related to the Heritage Brands sale and a 3% fall from the 53rd week last year.
EPS, on a non-GAAP basis, is expected to be in the range of $3.05-$3.20 compared with $3.72 in the year-ago quarter. This view includes an unfavorable currency impact of 9 cents per share. EPS, on a GAAP basis, is expected to be in the band of $2.83-$2.98 compared with $4.55 in the year-ago quarter.
For fiscal 2024, the company still 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 9.2%, down from 10.1% projected earlier.
Management now envisions non-GAAP EPS to be in the range of $11.55-$11.70 compared with the earlier view of $11.55-$11.80. GAAP EPS is expected to be in the band of $10.55-$10.70 compared with the prior guidance of $11.20-$11.45. 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 15 cents per share from currency movements.
Shares of this Zacks Rank #3 (Hold) company have gained 8.3% in the past three months against the industry's 1% decline.
Key Picks
We have highlighted three better-ranked stocks, namely, Planet Fitness (PLNT - Free Report) , Gildan Activewear (GIL - Free Report) and Royal Caribbean (RCL - Free Report) .
Planet Fitness has a trailing four-quarter earnings surprise of 7.8%, on average. The Zacks Consensus Estimate for PLNT’s current financial-year sales indicates growth of 8.9% from the year-ago figure.
Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.4%, on average.
The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 15.6% from the year-ago figure.
Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 16.2%, on average.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates an increase of 18.6% and 71.9%, respectively, from the year-ago levels.
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PVH's Q3 Earnings Beat Estimates, Stock Dips on Weak Q4 Guidance
PVH Corporation (PVH - Free Report) reported better-than-expected results in the third quarter of fiscal 2024, wherein both earnings and revenues topped the Zacks Consensus Estimate. The bottom line 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 growth in adjusted earnings per share (EPS).
However, shares of this apparel designer lost more than 6% in after-hours trading yesterday. This is likely to have been due to a decline in revenues in the fiscal third quarter and soft guidance for the fiscal fourth quarter. Also, management cut the upper-end view for EPS for fiscal 2024.
Let’s Delve Deeper Into PVH’s Q3 Performance
PVH reported adjusted earnings of $3.03 per share, up 4.5% from the year-ago quarter's $2.90. The bottom line also beat the Zacks Consensus Estimate of earnings of $2.61 per share and the company’s guidance of $2.50. The figure included the positive impacts of foreign currency translations of 5 cents a share.
Revenues fell 5% year over year (down 6% at constant currency) to $2,255 million but beat the consensus mark of $2,228 million. Management had guided a revenue decline of 6-7% and 7-8% on a constant currency basis. This included a 2% drop from the sale of the Heritage Brands women’s intimates business last year.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
The company's international businesses saw a 0.4% rise in revenues (down 1.8% on a constant currency basis). Growth in Asia Pacific in local currency was more than compensated by the strategic reduction of 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 dip of 6% from the previous year.
PVH Corp. Price, Consensus and EPS Surprise
PVH Corp. price-consensus-eps-surprise-chart | PVH Corp. Quote
Direct-to-consumer revenues climbed 0.4% from the prior-year period (down 1% on a constant-currency basis). Revenues in the company’s owned and operated physical stores rose 0.7% year over year (down 0.7% on a constant currency basis). The digital commerce unit of the owned and operated stores decreased 0.9% (2.6% on a constant-currency basis) year over year, mainly due to reduced sales in Europe.
Wholesale revenues fell 7.6% from the prior-year period (down 9.1% on a constant-currency basis). The decline was largely due to a 4% decline in sales of the Heritage Brands women's intimates business. The remaining decline was attributed to its ongoing strategic effort to reduce wholesale revenues in Europe.
The company's gross profit of $1.3 billion dipped 1.5% year over year. The gross margin expanded 170 bps to 58.4% due to a favorable shift in channel mix and a fall in sales to low-margin wholesale accounts.
Selling, general and administrative expenses rose 9.1% year over year to $1.2 billion.
The company’s adjusted earnings before interest and taxes totaled $236 million, down 5.2% from the prior-year quarter.
PVH’s Segmental Analysis
Revenues for the Calvin Klein segment were down 2.8% year over year (down 3.9% on a constant currency basis). The segment recorded a 0.8% jump (down 0.9% in constant currency) at Calvin Klein International and 9% decrease at Calvin Klein North America mainly due to the timing of wholesale shipments.
Revenues for the Tommy Hilfiger brand dropped 0.7% year over year (down 2.4% in constant currency). Revenues were flat year over year (down 2.4% in constant currency) in Tommy Hilfiger International, mostly due to reduced sales in Europe. Revenues at Tommy Hilfiger North America dipped 3% year over year.
The Heritage Brands segment's revenues plunged 54% year over year. This included a 44% 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 third quarter with cash and cash equivalents of $0.6 billion, long-term debt of $1.7 billion and stockholders' equity of $5.3 billion.
In alignment with the PVH+ Plan's objective to return excess cash to shareholders, the company executed the repurchase of 300,000 shares of its common stock, amounting to $29 million in the reported quarter. It made a total share repurchase of 2.4 million shares for $254 million in the nine months of fiscal 2024. Management anticipates repurchasing shares of $400 million for the fiscal year 2024.
What to Expect From PVH in Q4 & FY24
For the fourth quarter, revenues are projected to decline in the range of 6-7% (down 4-5% in constant currency) from the year-ago quarter, including a 1% reduction related to the Heritage Brands sale and a 3% fall from the 53rd week last year.
EPS, on a non-GAAP basis, is expected to be in the range of $3.05-$3.20 compared with $3.72 in the year-ago quarter. This view includes an unfavorable currency impact of 9 cents per share. EPS, on a GAAP basis, is expected to be in the band of $2.83-$2.98 compared with $4.55 in the year-ago quarter.
For fiscal 2024, the company still 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 9.2%, down from 10.1% projected earlier.
Management now envisions non-GAAP EPS to be in the range of $11.55-$11.70 compared with the earlier view of $11.55-$11.80. GAAP EPS is expected to be in the band of $10.55-$10.70 compared with the prior guidance of $11.20-$11.45. 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 15 cents per share from currency movements.
Shares of this Zacks Rank #3 (Hold) company have gained 8.3% in the past three months against the industry's 1% decline.
Key Picks
We have highlighted three better-ranked stocks, namely, Planet Fitness (PLNT - Free Report) , Gildan Activewear (GIL - Free Report) and Royal Caribbean (RCL - Free Report) .
Planet Fitness, the leading franchisor and operator of fitness centers, sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Planet Fitness has a trailing four-quarter earnings surprise of 7.8%, on average. The Zacks Consensus Estimate for PLNT’s current financial-year sales indicates growth of 8.9% from the year-ago figure.
Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.4%, on average.
The consensus estimate for Gildan Activewear’s current financial-year EPS indicates growth of 15.6% from the year-ago figure.
Royal Caribbean carries a Zacks Rank of 2 at present. RCL has a trailing four-quarter earnings surprise of 16.2%, on average.
The Zacks Consensus Estimate for RCL’s 2024 sales and EPS indicates an increase of 18.6% and 71.9%, respectively, from the year-ago levels.