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Why Is PVH (PVH) Down 12.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for PVH (PVH). Shares have lost about 12.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is PVH due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

PVH Corp Q4 Earnings & Sales Beat on Brand Strength

PVH Corp reported solid fourth-quarter fiscal 2021 results, wherein the bottom and top lines surpassed the Zacks Consensus Estimate and improved year over year.

Despite the tough economic environment, including the impacts of the pandemic, inflation and the Ukraine war, results gained from brand strength, particularly in Calvin Klein and Tommy Hilfiger, as well as solid online show and improved customer engagement.

Q4 Highlights

PVH Corp reported adjusted earnings of $2.84 per share against the year-ago quarter's loss of 38 cents. The bottom line beat the Zacks Consensus Estimate of $1.98. On a GAAP basis, the company reported earnings of $5.53 per share, reflecting a sharp improvement from a loss of 81 cents in the prior-year quarter.

In the fiscal fourth quarter, revenues advanced 16% year over year to $2,430 million. The top line also surpassed the Zacks Consensus Estimate of $2,380 million. This can be attributable to strength in international businesses, particularly in Europe. On the flip side, continued supply-chain and logistics headwinds, as well as the impacts of the pandemic, particularly the Omicron variant, acted as deterrents in the quarter.

Direct-to-consumer revenues rose 13% year over year in the quarter. The company's retail stores continue to face pressure due to the pandemic. Certain stores in Europe and China remained closed, with many others operating on reduced hours during the quarter. Wholesale revenues jumped 20% in the fiscal fourth quarter, driven by double-digit growth in the online business of its traditional and pure-play wholesale customers, along with the positive impact of the shift in the timing of U.S. wholesale shipments.

Revenues in the digital channel rose roughly 10% in the quarter under review.

The company's gross profit amounted to $1,300.3 million, up 26% year over year. The gross margin expanded 440 bps to 58.3%, owing to full-price selling and a positive sales mix, which offset higher freight costs.

Adjusted selling, general and administrative expenses rose 13.4% year over year to $1,255.2 million. Adjusted earnings before interest and taxes totaled $174.6 million compared with $28.5 million in the prior-year quarter, driven by higher sales and improved margins.

Segment Analysis

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

Revenues for the Calvin Klein segment improved 27% year over year. While sales for Calvin Klein North America increased 32% and Calvin Klein International climbed 24%.

Revenues for the Tommy Hilfiger segment rose 18% year over year in the reported quarter. Revenues were up 14% at Tommy Hilfiger North America and 20% at Tommy Hilfiger International.

The Heritage Brands segment's revenues declined 33% year over year in the quarter under review.

Financial Details

PVH Corp ended the quarter with cash and cash equivalents of $1,242.5 million, long-term debt of $2,317.6 million and stockholders' equity of $5,288.8 million. The company also bought back $350 million worth of shares under its existing $2-billion share repurchase program in fiscal 2021.

Outlook

Management issued the first quarter and fiscal 2022 view. The guidance includes uncertainty stemming from the war in Ukraine and other macroeconomic challenges, including inflation, continued impacts of the COVID-19 pandemic, supply-chain and logistics disruptions that are resulting in delivery delays, and a lack of inventory availability for stores and digital businesses.

For fiscal 2022, revenues are anticipated to increase 2-3% year over year (up 6-7% on a cc basis). This is inclusive of a 2% reduction each for the exit of the Heritage Brands Retail business along with temporary store closure and temporary halt of commercial activities in Russia and Belarus, as well as lower wholesale shipments to Ukraine. The bottom line is expected to be $9.00 per share, whereas it reported $13.25 and $10.15 on a GAAP and non-GAAP basis, respectively, in the prior year. The fiscal 2022 operating margin is likely to be 10%.

For first-quarter fiscal 2022, management expects revenues to remain flat year over year (up 4% on a cc basis). This is inclusive of a 5% reduction each for the exit of the Heritage Brands Retail business along with a 1% reduction stemming from temporary store closures and a halt of commercial activities in Russia and Belarus, as well as lower wholesale shipments to Ukraine. The bottom line is likely to be $1.55-$1.60 per share, whereas it reported $1.38 and $1.92 on a GAAP and non-GAAP basis, respectively, in the year-ago quarter.

 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -26.08% due to these changes.

VGM Scores

Currently, PVH has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, PVH has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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