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Shares of PVH Corporation (PVH - Free Report) rose more than 2% after the trading session on Aug 29, following the 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.
We note that PVH shares have gained 14.6% year to date against the industry's decline of 3.7%.
Q2 Highlights
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.
Image Source: Zacks Investment Research
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 decreased 7.8% year over year to $1,099.5 million and lagged our estimate of $1,107.9.
This Zacks Rank #4 (Sell) 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.
Segmental Analysis
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.
Financial Details
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. Both guidances include 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%.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates year-over-year increases of 2.2% and 31%, respectively.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
Crocs, which offers casual lifestyle footwear and accessories, presently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 15%.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 13.1% and 2.8% from the year-ago period’s reported figure. CROX has a trailing four-quarter earnings surprise of 21.8%, on average.
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PVH Corp (PVH) Q2 Earnings & Revenues Surpass Estimates
Shares of PVH Corporation (PVH - Free Report) rose more than 2% after the trading session on Aug 29, following the 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.
We note that PVH shares have gained 14.6% year to date against the industry's decline of 3.7%.
Q2 Highlights
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.
Image Source: Zacks Investment Research
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 decreased 7.8% year over year to $1,099.5 million and lagged our estimate of $1,107.9.
This Zacks Rank #4 (Sell) 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.
Segmental Analysis
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.
Financial Details
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.
PVH Corp. Price, Consensus and EPS Surprise
PVH Corp. price-consensus-eps-surprise-chart | PVH Corp. Quote
Outlook
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. Both guidances include 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%.
Stocks to Consider
Some better-ranked companies are Crocs (CROX - Free Report) , Royal Caribbean (RCL - Free Report) and MGM Resorts (MGM - Free Report) .
MGM Resorts currently sports a Zacks Rank #1 (Strong Buy). The company has a trailing four-quarter earnings surprise of 81%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGM’s 2024 sales and EPS indicates year-over-year increases of 2.2% and 31%, respectively.
Royal Caribbean sports a Zacks Rank #1 at present. RCL has a trailing four-quarter earnings surprise of 26.4%, on average.
The Zacks Consensus Estimate for RCL’s 2023 sales and EPS indicates increases 47.9% and 158.3%, respectively, from the year-ago period’s reported levels.
Crocs, which offers casual lifestyle footwear and accessories, presently carries a Zacks Rank #2 (Buy). The expected EPS growth rate for three to five years is 15%.
The Zacks Consensus Estimate for Crocs’ current financial-year sales and earnings suggests growth of 13.1% and 2.8% from the year-ago period’s reported figure. CROX has a trailing four-quarter earnings surprise of 21.8%, on average.