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PVH Corporation (PVH - Free Report) 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.
PVH shares declined 22.1% in the after-hours trading session on Apr 1. The decrease can be attributed to soft sales guidance for first-quarter fiscal 2024. The company lowered its sales view for fiscal 2024.
We note that shares of this currently Zacks Rank #2 (Buy) company have gained 18.8% in the past three months against the industry's 5.9% decline.
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.
Image Source: Zacks Investment Research
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.
Our model predicted the Tommy Hilfiger brand to register a sales decline of 0.6% in the fiscal fourth quarter. Sales for Calvin Klein were anticipated to increase 2.9% year over year, while Heritage Brands was expected to deliver a sales decline of 75.4%.
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.
Operating margin for the full year is expected to remain roughly in line with 10.1% achieved in 2023. This projection suggests a disciplined approach to cost management and operational efficiency, aiming to preserve profitability margins amidst revenue pressures.
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.
PVH anticipates interest expenses of $88 million. The effective tax rate is expected to be 21%.
Other Stocks to Consider
Some other top-ranked companies in the Consumer Discretionary sector are Ralph Lauren Corp. (RL - Free Report) , Crocs, Inc. (CROX - Free Report) and Gildan Activewear Inc. (GIL - Free Report) .
Ralph Lauren, a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia and internationally, 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 Ralph Lauren’s fiscal 2024 sales and EPS indicates year-over-year growth of 2.7% and 22.7%, respectively. The company has a trailing four-quarter earnings surprise of 18.7%, on average.
Crocs, a leading footwear brand with its focus on comfort and style, currently has a Zacks Rank of 2. CROX has a trailing four-quarter earnings surprise of 14.2%, on average.
The Zacks Consensus Estimate for Crocs’ 2024 sales and EPS indicates increases of 3.9% and 2.9%, respectively, from the year-ago period’s reported levels.
Gildan Activewear, a manufacturer and marketer of premium quality branded basic activewear, presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales and earnings suggests growth of 1.7% and 14.4% from the year-ago period’s reported figure. GIL has a negative trailing four-quarter earnings surprise of 0.7%, on average.
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PVH Q4 Earnings Beat Estimates, Revenues Remain Flat Y/Y
PVH Corporation (PVH - Free Report) 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.
PVH shares declined 22.1% in the after-hours trading session on Apr 1. The decrease can be attributed to soft sales guidance for first-quarter fiscal 2024. The company lowered its sales view for fiscal 2024.
We note that shares of this currently Zacks Rank #2 (Buy) company have gained 18.8% in the past three months against the industry's 5.9% decline.
PVH Corp. Price, Consensus and EPS Surprise
PVH Corp. price-consensus-eps-surprise-chart | PVH Corp. Quote
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.
Image Source: Zacks Investment Research
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.
Our model predicted the Tommy Hilfiger brand to register a sales decline of 0.6% in the fiscal fourth quarter. Sales for Calvin Klein were anticipated to increase 2.9% year over year, while Heritage Brands was expected to deliver a sales decline of 75.4%.
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.
Operating margin for the full year is expected to remain roughly in line with 10.1% achieved in 2023. This projection suggests a disciplined approach to cost management and operational efficiency, aiming to preserve profitability margins amidst revenue pressures.
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.
PVH anticipates interest expenses of $88 million. The effective tax rate is expected to be 21%.
Other Stocks to Consider
Some other top-ranked companies in the Consumer Discretionary sector are Ralph Lauren Corp. (RL - Free Report) , Crocs, Inc. (CROX - Free Report) and Gildan Activewear Inc. (GIL - Free Report) .
Ralph Lauren, a major designer, marketer and distributor of premium lifestyle products in North America, Europe, Asia and internationally, 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 Ralph Lauren’s fiscal 2024 sales and EPS indicates year-over-year growth of 2.7% and 22.7%, respectively. The company has a trailing four-quarter earnings surprise of 18.7%, on average.
Crocs, a leading footwear brand with its focus on comfort and style, currently has a Zacks Rank of 2. CROX has a trailing four-quarter earnings surprise of 14.2%, on average.
The Zacks Consensus Estimate for Crocs’ 2024 sales and EPS indicates increases of 3.9% and 2.9%, respectively, from the year-ago period’s reported levels.
Gildan Activewear, a manufacturer and marketer of premium quality branded basic activewear, presently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Gildan Activewear’s current financial-year sales and earnings suggests growth of 1.7% and 14.4% from the year-ago period’s reported figure. GIL has a negative trailing four-quarter earnings surprise of 0.7%, on average.