PVH Corp PVH delivered mixed first-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues marginally missed the same. With this, the company delivered 20th straight quarter of bottom-line beat.
However, shares of the company fell 11.4% in the after-hours trading on May 29 due to dull earnings view for both second-quarter and fiscal 2019. Adjusted earnings per share (EPS) are envisioned in the band of $10.20-$10.30 for the fiscal year, down from the earlier guided range of $10.30-$10.40 and the Zacks Consensus Estimate of $10.43. Additionally, foreign currency remains a headwind in fiscal 2019. Both GAAP and non-GAAP earnings projections include negative impacts of roughly 32 cents per share.
For the second quarter, adjusted EPS is expected to be $1.85-$1.90, down from $2.18 in the year-ago quarter and the consensus mark of $2.40. Management stated that the tough and volatile macroeconomic environment continued into the fiscal second quarter along with soft U.S. and China retail environment.
PVH Corp’s adjusted EPS came in at $2.46, which included adverse currency impacts of 15 cents. The bottom line grew nearly 4.2% year over year and surpassed the Zacks Consensus Estimate of $2.44. The metric also outshined the company’s guided range of $2.40-$2.45.
On a GAAP basis, the company delivered earnings of $1.08 per share, down 52.8% from $2.29 registered in the year-ago quarter. However, the reported figure significantly outperformed management’s guidance of 25-30 cents.
PVH Corp. Price, Consensus and EPS Surprise
PVH Corp. price-consensus-eps-surprise-chart | PVH Corp. Quote
In the fiscal first quarter, revenues inched up 2% to $2,356.3 million driven by growth at its Tommy Hilfiger and Heritage Brands segments, offset by flat revenues at Calvin Klein. On a constant-currency (cc) basis, revenues registered an improvement of 6%. However, the top line marginally missed the Zacks Consensus Estimate of $2,368 million.
The company’s total gross profit inched up 0.4% to $1,295.9 million, while gross margin contracted 80 basis points (bps) to 55%. Nonetheless, adjusted EBIT was up 6.4% to $267 million including adverse currency impacts of nearly $14 million. Adjusted EBIT growth was mainly backed by improvements in the Calvin Klein and Tommy Hilfiger businesses.
PVH Corp reports its financial results under three segments — Calvin Klein, Tommy Hilfiger and Heritage Brands.
Revenues at Calvin Klein remained flat year over year at $890 million (up 4% at cc). The segment’s International revenues fell 2% to $466 million (up 5% at cc). Robust growth in Europe was more than offset by the adverse impacts of currency and weakness in China. Also, International comparable store sales (comps) declined 4%. However, the segment’s North America revenues were up 2% to $424 million (up 3% at cc), owing to growth at its wholesale business, somewhat offset by a 5% fall in comps.
Revenues at the Tommy Hilfiger segment improved 4% to $1.1 billion (up 9% at cc). International revenues at the segment increased 4% to $680 million (up 12% at cc). The improvement was driven by a stellar performance in Europe and comps growth of 9%. Additionally, the segment’s North America business witnessed 3% revenue growth to $372 million (up 3% at cc), backed by growth in its wholesale business. However, the upside was somewhat offset by a 4% comps decline.
The Heritage Brands segment’s revenues rose 1% year over year to $415 million driven by growth at the wholesale business. However, comps at the segment declined 6%.
In first-quarter fiscal 2019, PVH Corp bought back roughly 500,000 shares for $61 million, under its $2-billion buyback authorization, through Jun 3, 2023. Since its inception, the company has repurchased nearly 9.5 million shares for $1.1 billion as part of its commitment to return value to its shareholders.
Management’s guidance for fiscal 2019 includes the assumption that two of the company’s pending buyouts — Gazal Corporation Limited and the TH CSAP — will be completed in second-quarter fiscal 2019. Backed by these businesses, revenues for the fiscal year are projected to increase by almost $150 million.
During fiscal 2019, the company projects revenues to increase about 3% (up 5% at cc) compared with 4% growth predicted earlier. Brand-wise, revenues are anticipated to increase roughly 6% at Tommy Hilfiger. Further, revenues are expected to remain flat at Calvin Klein and Heritage Brands. At Tommy Hilfiger and Calvin Klein revenues are likely to grow a respective 9% and 2% at cc. Earlier, management expected revenues to increase roughly 6%, 2% and 3% for Tommy Hilfiger, Calvin Klein and Heritage Brands businesses, respectively. At cc, the metric at Tommy Hilfiger and Calvin Klein was projected to grow 8% and 3%, respectively.
Net interest expenses are expected to grow nearly $120 million, up from $116 million incurred in fiscal 2018. Further, adjusted effective tax rate is projected in the band of 14-15%.
GAAP EPS is projected to be $9.05-$9.15 compared with the previous projection of $8.90-$9.00. In fiscal 2018, PVH Corp reported GAAP EPS of $9.65.
For second-quarter fiscal 2019, the company expects total revenues to remain flat year over year (up 2% at cc). Brand-wise, revenues are expected to increase 3% (up 6% at cc) at Tommy Hilfiger. However, the metric is likely to decline 4% (down 2% at cc) at Calvin Klein, and 2% at Heritage Brands.
Net interest expenses are anticipated to decline to roughly $28 million in the fiscal second quarter. The adjusted effective tax rate for the quarter is anticipated in the range of 21.5-22.5%.
On a GAAP basis, the company envisions EPS in the range of $2.75-2.80 versus $2.12 in the prior-year quarter. Notably, GAAP and adjusted earnings guidance include an anticipated adverse impact of nearly 6 cents from foreign currency.
Year to date, this Zacks Rank #3 (Hold) stock has gained 15.1% compared with the industry’s 18.8% rally.
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