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PVH Corp (PVH) Q4 Earnings & Revenues Beat on Brand Strength

Shares of PVH Corporation PVH jumped more than 10% after market close on Mar 27, following the fourth-quarter fiscal 2022 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate. Despite macroeconomic challenges, results gained from the continued momentum in its core brands — Calvin Klein and Tommy Hilfiger — along with pricing actions and strong consumer engagement.

Management has been on track with its PVH+ Plan, which is likely to result in substantial cost efficiencies and better productivity. Per PVH, the business momentum continues to remain positive in 2023.

In the past three months, this Zacks Rank #2 (Buy) stock has gained 3.9% against the industry's decline of 1.9%.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Q4 Highlights

PVH Corp reported adjusted earnings of $2.38 per share, down 16.2% from the year-ago quarter's $2.84. However, the bottom line beat the Zacks Consensus Estimate of $1.64 and our estimate of $1.63. On a GAAP basis, the company reported earnings of $2.18 per share compared with $5.53 in the prior-year quarter.

In the fiscal fourth quarter, revenues rose 2% year over year (up 8% on a constant currency or cc basis) to $2,489 million. This is mainly due to the impacts of the Ukraine war, such as Russia store closures, the cessation of wholesale shipments to Russia and Belarus, and a reduction in wholesale shipments to Ukraine. Also, the top line surpassed the Zacks Consensus Estimate of $2,336 million and our estimate of $2,324 million.

On the flip side, the company witnessed growth across Europe and North America, particularly in the direct-to-consumer business, along with continued strength in its Tommy Hilfiger and Calvin Klein brand businesses. However, the company continues to witness negative impacts from the COVID-19 pandemic in China.

Direct-to-consumer revenues grew 4% year over year in the quarter, whereas Wholesale revenues remained flat year over year. Revenues in the digital channel declined roughly 8% in the quarter under review.

The company's gross profit amounted to $1,390.5 million, down 1.8% year over year. The gross margin contracted 240 bps to 55.9% due to higher costs and increased promotions, which more than offset gains from price increases and a favorable shift in regional and channel mix.

Adjusted selling, general and administrative expenses decreased 2% year over year to $1,186.6 million. Adjusted earnings before interest and taxes totaled $215 million compared with $174.6 million in the prior-year quarter. This mainly resulted from reduced expenses and revenue growth on a cc basis, which somewhat offset dismal gross margins. The metric also included $21 million of adverse foreign currency impacts.

Segmental Analysis

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

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Revenues from the Calvin Klein segment moved up 3% year over year. Sales from Calvin Klein North America advanced 8%, while the same for Calvin Klein International rose 1%.

Revenues from the Tommy Hilfiger segment declined 1% year over year in the reported quarter. Revenues were up 9% at Tommy Hilfiger North America, while the metric declined 4% at Tommy Hilfiger International.

The Heritage Brands segment's revenues plunged 26% year over year in the quarter under review.

Financial Details

PVH Corp ended the quarter with cash and cash equivalents of $550.7 million, long-term debt of $2,177 million, and stockholders' equity of $5,012.7 million. The company also bought back $400 million of shares under its existing $3-billion share repurchase program in the quarter under review.

PVH Corp. Price, Consensus and EPS Surprise

 

PVH Corp. price-consensus-eps-surprise-chart | PVH Corp. Quote

Outlook

Management issued its first quarter and fiscal 2023 view. For fiscal 2023, revenues are anticipated to grow 3-4% (up 2-3% on a cc basis). This is inclusive of less than 1% benefit from an additional week in 2023.

The bottom line is expected to be $10 for the year, whereas it reported $3.03 on a GAAP basis and $8.97 on an adjusted basis last year. The view includes a positive impact of 15 cents from favorable currency. Also, the operating margin is estimated to be 10%. Interest expenses are likely to be $100 million, suggesting a decline from the prior year’s reported figure of $83 million, due to higher interest rates. Also, the effective tax rate is expected to be 24%.

For first-quarter fiscal 2023, management expects revenues to remain flat year over year (up 3% on a cc basis). The bottom line is likely to be $1.90, whereas it reported $1.94 in the year-ago quarter. This includes unfavorable currency impacts of 10 cents. Interest expenses for the fiscal first quarter are likely to be $23 million, whereas it posted $22 million in the year-ago period. The effective tax rate is expected to be 24%.

Other Stocks to Consider

Some other top-ranked companies are Ralph Lauren RL, Deckers Outdoor DECK and H&R Block HRB.

Ralph Lauren, a footwear and accessories dealer, has 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 next-financial-year sales and EPS suggests growth of 5% and 12.8%, respectively, from the year-ago reported figures. RL has a trailing four-quarter earnings surprise of 23.6%, on average.

Deckers Outdoor currently carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 31%, on average.

The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and earnings suggests growth of 12% and 13.5% from the year-ago period’s reported numbers, respectively.

H&R Block provides assisted income tax return preparation and do-it-yourself tax return preparation services. HRB currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for H&R Block’s current financial year’s EPS suggests growth of 9.4% from the year-ago reported figure. H&R Block has a trailing four-quarter earnings surprise of 10.7%, on average.

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Ralph Lauren Corporation (RL) : Free Stock Analysis Report

H&R Block, Inc. (HRB) : Free Stock Analysis Report

PVH Corp. (PVH) : Free Stock Analysis Report

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