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PVH Corp (PVH - Free Report) has long been gaining from the continued momentum in its core brands — Calvin Klein and Tommy Hilfiger. Strength in the international business bodes well. Also, the company is on track with its PVH+ Plan.
Driven by these factors, the bottom and top lines surpassed the Zacks Consensus Estimate in second-quarter fiscal 2023. The company witnessed double-digit revenue growth in its direct-to-consumer business in stores and online. This led to year-over-year sales growth of 4% (up 2% on a constant-currency or cc basis).
Analysts seem optimistic about the stock. The Zacks Consensus Estimate for PVH Corp’s fiscal 2023 sales and EPS is pegged at $9.4 billion and $10.3, suggesting respective growth of 3.8% and 15.2% from the year-ago reported figures. The Zacks Consensus Estimate for PVH’s fiscal 2023 earnings has moved up 3.2% in the past 30 days.
Let’s Delve Deeper
PVH Corp’s Tommy Hilfiger and Calvin Klein brands continued to perform well in second-quarter fiscal 2023, driven by robust consumer demand. Notably, Tommy Hilfiger’s revenues rose 3% and Calvin Klein’s revenues grew 6% year over year in the quarter.
The Tommy Hilfiger brand showcased its most iconic Tommy products, such as the Polo shirt, the Oxford shirt and Chinos, at some of the biggest cultural events, including New York Fashion Week and Formula One Grand Prix. The brand witnessed a 170% increase in sales of the Oxford shirt in the week following its campaign. It also continued to gain momentum in the quarter by being part of the launch of its Mercedes AMG Formula One and Awake collaboration.
Meanwhile, the Calvin Klein brand launched a highly successful partnership with Jennie Kim, which was sold globally within days. Other notable partnerships with some of the world's most iconic female athletes ahead of the World Cup acted as tailwinds. Recently, it launched its fall 2023 campaign, highlighting the iconic underwear denim. Going forward, management is confident about the underlying power of Calvin Klein and Tommy Hilfiger brands, which position the company's business to succeed amid the ever-changing consumer landscape.
Its international business has been performing well for quite some time, which continued in the fiscal second quarter. Notably, the international unit’s revenues jumped 6% year over year on a constant-currency basis, driven by growth in the Asia Pacific and Europe regions. Going ahead, management expects international business to drive growth.
PVH Corp’s multi-year strategy PVH+ Plan aims at accelerating growth via boosting its core strengths, and connecting Calvin Klein and TOMMY HILFIGER brands with consumers through five major drivers. These drivers are — win with product; win with consumer engagement; win in the digitally-led marketplace; develop a demand- and data-driven operating model; and drive efficiencies and invest in growth.
The company expects to strengthen its presence in the global demand spaces, where its iconic labels resonate well with consumers. PVH is focused on fueling digital growth by developing a holistic distribution strategy for Calvin Klein and TOMMY HILFIGER, driven by digital and direct-to-consumer channels and wholesale partnerships. Moreover, PVH Corp looks to develop a demand and data-driven operating model with a systematic and repeatable product creation model.
PVH focuses on boosting efficiencies to be cost-competitive, and, in turn, reinvesting in strategic plans. In sync with its plans, PVH is on track to reduce 10% of its workforce in its global offices by the end of 2023. The move is likely to generate savings of more than $100 million, which will then be reinvested in digital, supply chain and consumer engagement related to the PVH+ Plan.
In a recent development, PVH Corp announced the extension of its license agreements with G-III Apparel Group from 2025 to 2027 as part of the PVH+ plan. The deal will enable the smooth transition of core product categories to PVH at the end of the extended terms. The transaction mainly includes the Calvin Klein and Tommy Hilfiger brands in the United States and Canada, particularly the women’s North American wholesale business.
Image Source: Zacks Investment Research
Consequently, shares of this Zacks Rank #3 (Hold) company have gained 8.1% year to date against the industry’s decline of 4.9%.
Headwinds to Overcome
PVH Corp has been witnessing higher interest rates stemming from the ongoing tough macroeconomic environment. In the second quarter of fiscal 2023, interest expenses rose 20% year over year to $24 million.
For fiscal 2023, 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. Interest expenses for the fiscal third quarter are likely to be $25 million, whereas the company posted $19 million in the year-ago period.
Also, elevated inventory costs and increased investments to support the company’s strategic initiatives dented margins in the quarter. The gross margin contracted 40 bps year over year to 57.6% in second-quarter fiscal 2023. The 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. Consequently, adjusted earnings were $1.98 per share, down 4.8% from the year-ago quarter's $1.94.
Wrapping Up
Although a tough macroeconomic environment is a near-term headwind, we believe that strength in core brands and international unit, and gains from the PVH+ Plan will help the stock sustain its momentum.
The PEG ratio for PVH is just 0.55, far lower than the industry average of 1.21. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, PVH is a solid choice on the value front from multiple angles. Notably, a VGM Score of A raises optimism in the stock.
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 of 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) Relies on Brand Strength Amid Interest Rate Hike
PVH Corp (PVH - Free Report) has long been gaining from the continued momentum in its core brands — Calvin Klein and Tommy Hilfiger. Strength in the international business bodes well. Also, the company is on track with its PVH+ Plan.
Driven by these factors, the bottom and top lines surpassed the Zacks Consensus Estimate in second-quarter fiscal 2023. The company witnessed double-digit revenue growth in its direct-to-consumer business in stores and online. This led to year-over-year sales growth of 4% (up 2% on a constant-currency or cc basis).
Analysts seem optimistic about the stock. The Zacks Consensus Estimate for PVH Corp’s fiscal 2023 sales and EPS is pegged at $9.4 billion and $10.3, suggesting respective growth of 3.8% and 15.2% from the year-ago reported figures. The Zacks Consensus Estimate for PVH’s fiscal 2023 earnings has moved up 3.2% in the past 30 days.
Let’s Delve Deeper
PVH Corp’s Tommy Hilfiger and Calvin Klein brands continued to perform well in second-quarter fiscal 2023, driven by robust consumer demand. Notably, Tommy Hilfiger’s revenues rose 3% and Calvin Klein’s revenues grew 6% year over year in the quarter.
The Tommy Hilfiger brand showcased its most iconic Tommy products, such as the Polo shirt, the Oxford shirt and Chinos, at some of the biggest cultural events, including New York Fashion Week and Formula One Grand Prix. The brand witnessed a 170% increase in sales of the Oxford shirt in the week following its campaign. It also continued to gain momentum in the quarter by being part of the launch of its Mercedes AMG Formula One and Awake collaboration.
Meanwhile, the Calvin Klein brand launched a highly successful partnership with Jennie Kim, which was sold globally within days. Other notable partnerships with some of the world's most iconic female athletes ahead of the World Cup acted as tailwinds. Recently, it launched its fall 2023 campaign, highlighting the iconic underwear denim. Going forward, management is confident about the underlying power of Calvin Klein and Tommy Hilfiger brands, which position the company's business to succeed amid the ever-changing consumer landscape.
Its international business has been performing well for quite some time, which continued in the fiscal second quarter. Notably, the international unit’s revenues jumped 6% year over year on a constant-currency basis, driven by growth in the Asia Pacific and Europe regions. Going ahead, management expects international business to drive growth.
PVH Corp’s multi-year strategy PVH+ Plan aims at accelerating growth via boosting its core strengths, and connecting Calvin Klein and TOMMY HILFIGER brands with consumers through five major drivers. These drivers are — win with product; win with consumer engagement; win in the digitally-led marketplace; develop a demand- and data-driven operating model; and drive efficiencies and invest in growth.
The company expects to strengthen its presence in the global demand spaces, where its iconic labels resonate well with consumers. PVH is focused on fueling digital growth by developing a holistic distribution strategy for Calvin Klein and TOMMY HILFIGER, driven by digital and direct-to-consumer channels and wholesale partnerships. Moreover, PVH Corp looks to develop a demand and data-driven operating model with a systematic and repeatable product creation model.
PVH focuses on boosting efficiencies to be cost-competitive, and, in turn, reinvesting in strategic plans. In sync with its plans, PVH is on track to reduce 10% of its workforce in its global offices by the end of 2023. The move is likely to generate savings of more than $100 million, which will then be reinvested in digital, supply chain and consumer engagement related to the PVH+ Plan.
In a recent development, PVH Corp announced the extension of its license agreements with G-III Apparel Group from 2025 to 2027 as part of the PVH+ plan. The deal will enable the smooth transition of core product categories to PVH at the end of the extended terms. The transaction mainly includes the Calvin Klein and Tommy Hilfiger brands in the United States and Canada, particularly the women’s North American wholesale business.
Image Source: Zacks Investment Research
Consequently, shares of this Zacks Rank #3 (Hold) company have gained 8.1% year to date against the industry’s decline of 4.9%.
Headwinds to Overcome
PVH Corp has been witnessing higher interest rates stemming from the ongoing tough macroeconomic environment. In the second quarter of fiscal 2023, interest expenses rose 20% year over year to $24 million.
For fiscal 2023, 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. Interest expenses for the fiscal third quarter are likely to be $25 million, whereas the company posted $19 million in the year-ago period.
Also, elevated inventory costs and increased investments to support the company’s strategic initiatives dented margins in the quarter. The gross margin contracted 40 bps year over year to 57.6% in second-quarter fiscal 2023. The 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. Consequently, adjusted earnings were $1.98 per share, down 4.8% from the year-ago quarter's $1.94.
Wrapping Up
Although a tough macroeconomic environment is a near-term headwind, we believe that strength in core brands and international unit, and gains from the PVH+ Plan will help the stock sustain its momentum.
The PEG ratio for PVH is just 0.55, far lower than the industry average of 1.21. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, PVH is a solid choice on the value front from multiple angles. Notably, a VGM Score of A raises optimism in the stock.
Stocks to Consider
Some better-ranked companies are MGM Resorts (MGM - Free Report) , Royal Caribbean (RCL - Free Report) and Crocs (CROX - 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 of 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.