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PVH Corp (PVH) Q1 Earnings & Revenues Beat Estimates, View Up

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PVH Corporation (PVH - Free Report) reported first-quarter 2021 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and advanced year over year. Despite supply-chain disruptions related to the pandemic, results gained from brand strength, particularly in Calvin Klein and Tommy Hilfiger.

Also, solid e-commerce performance aided growth. Notably, revenues in digital channels surged 95% year over year in the quarter under review.

Management raised its 2021 revenue and earnings guidance. Backed by the strong performance and upbeat view, shares of the Zacks Rank #4 (Sell) company have gained 9.9% in the past three months outperforming the industry’s 8.8% growth.

Q1 Highlights

PVH Corp reported adjusted earnings of $1.92 per share against the year-ago quarter’s loss of $3.03. However, the figure beat the Zacks Consensus Estimate of 82 cents. On a GAAP basis, the company reported earnings of $1.38 per share against a loss of $15.37 reported in the prior-year quarter.

In the first quarter, revenues surged 55% year over year to $2,079 million. On a constant-currency (cc) basis, the metric improved 46%. Moreover, the top line exceeded the Zacks Consensus Estimate of $1,928 million. We note that solid performance across all regions and channels aided the top line.

Direct-to-consumer revenues skyrocketed 66% year over year in the first quarter. This uptick can be attributable to robust growth across all regions and brands, partly offset by continued pressures in retail stores and store closures in Europe. Meanwhile, wholesale revenues rose 53% in the fiscal first quarter, driven by solid sales in Europe and sturdy digital demand from its traditional and pure-play wholesale customers.

The company’s gross profit came in at $1,130.3 million, reflecting a sharp improvement from $579.1 million reported in the year-ago quarter. Moreover, gross margin expanded 960 bps to 59.1% owing to reduced promotions, positive sales mix and lower inventory reserves. Meanwhile, adjusted selling, general and administrative expenses rose 7.7% year over year to $988.1 million.

Adjusted earnings before interest and taxes came in at $249 million against last-year quarter’s loss of $247 million, driven by higher sales and improved margins.

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Segment Analysis

PVH Corp. reports financial results under three segments — Calvin Klein, Tommy Hilfiger and Heritage Brands.

Revenues for the Calvin Klein segment improved 65% year over year (up 56% at cc), with sales for Calvin Klein North America increasing 27% while Calvin Klein International surging 91%.

Revenues for the Tommy Hilfiger segment rose 63% year over year (up 52% at cc) in the reported quarter. Notably, revenues were up 25% at Tommy Hilfiger North America and 78% at Tommy Hilfiger International.

The Heritage Brands segment’s revenues improved 9% year over year in the quarter under review. This includes 14% of lost sales from the divestiture of its Speedo North America business.

Financial Details

PVH Corp ended the quarter with cash and cash equivalents of $913.2 million, long-term debt of $3,018.2 million and stockholders’ equity of $4,839.4 million.

PVH Corp. Price, Consensus and EPS Surprise

Outlook

Despite continued uncertainty related to COVID-19, management raised its 2021 view. It also noted that this guidance doesn’t expect any significant supply-chain disruptions, except a short delay of almost four to six weeks in certain inventory orders. Further, the company doesn’t foresee any new store closure, lockdowns or extensions of existing lockdowns.

However, the company’s earnings and revenues are likely to be affected by the health crisis. Its fiscal 2021 outlook on both reported and adjusted basis is forecasted to include operating losses of roughly $20 million related to the exit from the Heritage Brands Retail business by the first half of the year.

Notably, PVH Corp has been witnessing growth across its international business, which is further anticipated to exceed the pre-pandemic sales level in the rest of 2021. Meanwhile, the North American unit is likely to remain drab due to a slow recovery of international tourism.

Gross margin is envisioned to improve for the remaining part of the year. That said, it remains on track to restructure costs, including operating expenses and reallocating resources, in a bid to support business growth.

For 2021, revenues are anticipated to be 24-26% year over year (up 21-23% on a cc basis), which suggests an improvement from the earlier view of 22-24% (indicating a 19-21% rise at cc). Adjusted earnings are expected to be nearly $6.50 per share compared with the prior view of earnings of nearly $6.00 and against an adjusted loss of $1.97 reported in 2020.

This outlook excludes roughly $70 million of costs related to restructuring actions, including lowering headcount in a few international markets, certain store closures and a decline in real estate footprint, with approximately $21 million of costs associated with the exit from the Heritage Brands Retail business.

During second-quarter fiscal 2021, management expects revenues to increase 34-36% year over year (up 29-31% on a cc basis). Adjusted earnings are likely to be $1.15-$1.18 per share, up from 13 cents reported in the prior-year quarter. This doesn’t include $15 million of costs related to streamlining the organization and lowering real estate footprint as well as $13 million of costs related to the exit from the Heritage Brands Retail business.

3 Key Picks

Crocs, Inc (CROX - Free Report) , which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 15%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gildan Activewear, Inc. (GIL - Free Report) , which sports a Zacks Rank #1, has a long-term earnings growth rate of 28.6%.

G-III Apparel Group, Ltd. (GIII - Free Report) , which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 11.6%.

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