The impact of PVH’s guideline cuts on retail consumer spending

PVH Corp New York Stock Exchange: PVH is a global apparel company best known for its Calvin Klein and Tommy Hilfiger clothing, apparel, and accessories brands. The consumer discretionary company is divided into 6 departments, including the Tommy Hilfiger and Calvin Klein North America and International divisions, and the Heritage Brands Wholesale and Retail divisions. The company is at the forefront of contemporary and modern design trends. The company has recovered from its post-pandemic hangover thanks to improving margins, shrinking inventories and growth in consumer spending.

However, the recent cut in earnings guidance forced investors to hit the brakes as shares tumbled 22% despite the authorization of a $2 billion share repurchase program. This caused competitor actions such as Capri Holdings Limited NYSE: CPRImanufacturer of Versace, Jimmy Choo and Michael Kors products and Ralph Lauren Co. NYSE:RL sell out out of sympathy.

Strong quarter, but guidance was weak

PVH Corp reported fourth-quarter 2023 EPS of $3.71, beating consensus analyst estimates of $3.53 by 19 cents. Earnings before interest and taxes (EBIT) on a GAAP basis were $357 million, including a $5 million positive impact from forex, compared to $297 million in the prior-year period. Revenue was unchanged year-over-year at $2.49 billion, still topping consensus estimates of $2.42 billion. The company sold Heritage Brands’ women’s underwear business at the end of the fourth quarter. Interest expense fell to $20 million, down from $22 million in the same period a year earlier. The company has approved a $2 billion share buyback program through July 2028. Stay updated sectors of the stock market on MarketBeat.

Bad bearish driving

PVH Corp. posted fiscal first-quarter 2024 EPS declines of $2.15 versus consensus estimates of $2.59. Revenue is expected to decline 11% to $1.90 billion versus consensus estimates of $2.08 billion. Full-year 2024 EPS is expected to range from $10.75 to $11.00 versus consensus estimates of $12.11. Full-year 2024 revenues are expected to be in the range of $8.57 billion to $8.66 billion versus consensus estimates of $9.04 billion.

Divisive macroeconomic conditions between regions

International revenues increased 4% year-over-year, driven primarily by growth in Asia Pacific, which offset challenging macroeconomic conditions in Europe. This has impacted the wholesale channel. Tommy Hilfiger’s revenues increased 1% year over year, while Tommy Hilfiger International saw revenues decline 1%. Tommy Hilfiger North America reported a 4% revenue increase. Calvin Klein’s revenue increased 4% year over year. Calvin Klein International revenues increased 12%, while Calvin Klein North America revenues decreased 8% year over year.

Department stores are cautious about overstocking

Weakness in wholesale has overshadowed strong growth in direct-to-consumer (DTC). This can be attributed to department stores like Macy’s Inc. NYSE:M AND Nordstrom Inc. New York Stock Exchange: JWN be increasingly cautious about inventory levels as they recover from the post-pandemic inventory glut. Wholesale revenue fell 10% year-over-year, including a 3% decline in Heritage Brands’ women’s underwear business. Wholesale customers have taken a cautious approach to managing inventory levels by ordering less. Obtain AI-powered insights on MarketBeat.

Margin improvement

Gross margins improved to 60.3% compared to 55.9% in the year-ago period. This was attributed to benefits from reduced product, transportation and logistics costs and a favorable shift in regional channel mix. Inventories fell 21% year-over-year as the company proactively managed inventory levels.

CEO Insights

Stefan Larsson, CEO of PVH Corp., noted that the company has seen double-digit growth in its owned-and-operated e-commerce and high-single-digit growth in its stores. Larsson noted how the company ended 2023 in great shape, with the stock down 21% year-over-year, producing significant cash flow to repurchase $550 million of stock. They have expanded their European business by up to 20% compared to 2019. Asia is a growth engine gaining share with double-digit revenue growth.

Larsson remained optimistic, dismissing the lowered forecast: “From a numbers perspective, this translates into our 2024 forecast of revenues down 6% to 7% or down about 3% to 4%.” on a comparable basis, excluding the sale of our Heritage Brands announces operations in the 53rd week of 2023. We are driving further gross margin expansion and, despite the deleveraging of our European operations, we will maintain our EBIT margins compared to 2023 ”.

Ascending Triangle Daily Split Diagram

The PVH candlestick chart illustrates an ascending triangle distribution pattern. Prior to the earnings report, PVH had formed an ascending trend line from the $128.18 swing low, composed of higher lows on pullbacks. The flat horizontal trendline formed at $141.15 ahead of Q4 2023 earnings. The weak guidance caused a gap to $113.32 and a price collapse of 22%. The daily relative strength index (RSI) is attempting to break out of the oversold 30 band. The pullback support levels are at $104.72, $99.42, $92.90, and $88.04.

PVH Corp. Analyst Ratings and Price Targets I’m on MarketBeat. THE MarketBeat Stock Screener can help you find PVH Corp.’s peers and competitors.

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