PVH Corporation PVH reported better-than-expected results in the first quarter of fiscal 2025, wherein both earnings and revenues topped the Zacks Consensus Estimate. However, the bottom line fell year over year while the top line increased.
PVH reported adjusted earnings of $2.30 per share, down 6.1% from the year-ago quarter's $2.45. The bottom line surpassed the Zacks Consensus Estimate of earnings of $2.24 per share and the company’s guidance of $2.10-$2.25. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
The company continues to tap into the global consumer love for Calvin Klein and TOMMY HILFIGER brands, delivering impressive results. Alongside smoothly progressing on its PVH+ Plan execution, it is navigating a highly uncertain consumer and macroeconomic landscape and is not able to completely offset the impact.
Moving forward, PVH is focused on speeding up efforts to scale the impact of its solid product, next-level cut-through campaigns and marketplace execution across the key brands. These brands are likely to strengthen in the back half of 2025 and help the company accomplish its long-term goal of building the brands into the most desirable lifestyle brands. PVH is also committed to its Growth Driver 5 multi-year cost savings plan, which is likely to drive the growth trajectory in the second half.
Although the company has reiterated its revenue outlook for fiscal 2025, it has slashed adjusted operating margin and earnings per share views given the tough present backdrop and business’ current performance. The revised 2025 outlook includes an expected net negative impact with respect to the tariffs currently in effect for goods coming into the US, with a $65 million of unmitigated impact to 2025 EBIT or about $1.05 a share, and partly offsetting the impact of anticipated mitigation efforts, which will be in effect during the second half.
Consequently, PVH’s shares have fallen 7.4% in after-hours trading yesterday. This Zacks Rank #3 (Hold) company’s stock has gained 11.7% in the past three months against the industry's 2.7% drop.
Let’s Delve Deeper Into PVH’s Q1 Performance
Revenues jumped 2% year over year (up 2% at constant currency also) to $1.984 billion and beat the consensus mark of $1.936 billion. Management had guided quarterly revenues between flat to down 2%, and flat to down 1% on a constant-currency basis.
Direct-to-consumer revenues fell 3% from the prior-year period on both a reported and constant-currency basis. Revenues in the company’s owned and operated physical stores dipped 5% year over year on both a reported and constant-currency basis, as growth in EMEA was more than offset by decreases in Americas and APAC stemming from the tough consumer environment in such regions. The digital commerce unit of the owned and operated stores jumped 3% (up 4% on a constant-currency basis) year over year, backed by growth in the Americas.
PVH Corp. Price and EPS Surprise
PVH Corp. Price and EPS Surprise
PVH Corp. price-eps-surprise | PVH Corp. Quote
Wholesale revenues climbed 6% from the prior-year period (up 7% on a constant-currency basis), buoyed by the increases in Americas and EMEA.
The company's gross profit of $1.16 billion dipped 3.2% year over year. The gross margin contracted 280 bps to 58.6%, thanks to the adverse shift in channel mix, elevated promotional environment, the transition of earlier-licensed women’s product categories to an in-house wholesale business, and increased freight costs and higher discounts to customers to offset the impact of Calvin Klein product delivery delays.
Adjusted selling, general and administrative expenses were almost flat year over year at $1 billion. The company’s adjusted earnings before interest and taxes totaled $160.5 million, down 17.7% from the prior-year quarter.
PVH’s Segmental Analysis
Effective Feb. 3, 2025, PVH changed its reportable segments to region-focused to better coordinate with the changes in its business and organizational structure. The company’s new reportable segments are Europe, the Middle East and Africa (EMEA), Americas, Asia-Pacific (APAC), and Licensing.
EMEA revenues jumped 5% year over year (up 4% on a constant-currency basis), backed by growth across the wholesale and direct-to-consumer businesses.
Americas revenues climbed 7% (up 8% on a constant-currency basis), buoyed by growth in the wholesale business, somewhat offset by a mid-single-digit drop in the direct-to-consumer business. Higher wholesale revenues reflected the transition of earlier-licensed women’s product categories in house and the effect of a shift in the timing of wholesale shipments from the second half into the first half of 2025.
APAC revenues dropped 13%, (down 11% on a constant-currency basis), due to a 3% dip from the timing of the Lunar New Year shopping period, which was mainly in the fourth quarter of fiscal 2024, along with a tough consumer environment in the region, especially in China.
Licensing revenues fell 2% year over year owing to the transition of some previously licensed women's product categories in house.
PVH’s Brands’ Performance
Revenues for the Calvin Klein segment were flat year over year (flat on a constant-currency basis too).
Revenues for the Tommy Hilfiger brand jumped 3% year over year on a reported basis and a constant-currency basis, backed by growth in EMEA and the Americas.
The Heritage Brands segment's revenues dropped 4.6% year over year.
A Closer Look at PVH's Financial Performance
PVH ended the fiscal first quarter with cash and cash equivalents of $191 million, long-term debt of $1.7 billion and stockholders' equity of $4.6 billion.
The company has entered into ASR agreements this April to buy back an aggregate of $500 million of its common stock under its present $5-billion stock repurchase authorization.
In alignment with the PVH+ Plan's objective to return excess cash to shareholders, the company bought back 5.4 million shares of its common stock and paid $561 million with respect to the ASR agreements and open market purchases in the reported quarter. It made a total repurchase of 4.7 million shares for $500 million in fiscal 2024. Management now does not project making any additional payments to buy back the common stock in 2025.
What to Expect From PVH in Q2 & FY25?
For the second quarter, revenues are projected to rise low-single digits year over year (flat to up slightly on a constant-currency basis).
Earnings per share, on a non-GAAP basis, are expected to be in the range of $1.85-$2, lower than $3.01 earned in the year-ago quarter. This view includes an unfavorable, unmitigated impact with respect to the tariffs currently in place for goods coming into the US of nearly 20 cents a share. The foreign currency fluctuation impacts on second-quarter EPS are not likely to be material. Interest expenses are anticipated to increase to roughly $25 million compared with $19 million in the second quarter of fiscal 2024, while the adjusted effective tax rate is projected to be 20%.
For fiscal 2025, the company continues to anticipate revenues between flat to up slightly year over year, which is consistent on a constant-currency basis. PVH now expects the adjusted operating margin to be nearly 8.5% compared with the earlier guided range of flat to up slightly from 10% in fiscal 2024.
Management now envisions non-GAAP EPS to be in the range of $10.75-$11 compared with the earlier guidance of $12.40-$12.75 and $11.74 delivered in fiscal 2024. The EPS guidance for fiscal 2025 reflects a favorable impact of around 10 cents per share from foreign currency movements.
Interest expenses are likely to increase to roughly $85 million compared with $67 million last year, and the adjusted effective tax rate is forecast to be approximately 22%.
Key Consumer Discretionary Picks
We have highlighted three better-ranked stocks, namely, Ralph Lauren RL, Gildan Activewear GIL and The Marcus MCS.
Ralph Lauren, a designer and distributor of premium lifestyle products, including apparel, accessories and footwear, currently carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Ralph Lauren has a trailing four-quarter earnings surprise of 9%, on average. The Zacks Consensus Estimate for RL’s current financial-year sales indicates growth of 3.5% from the year-ago figure.
Gildan Activewear, a manufacturer of premium quality branded basic activewear, carries a Zacks Rank of 2 at present. GIL has a trailing four-quarter earnings surprise of 2.8%, on average.
The consensus estimate for Gildan Activewear’s current financial-year sales indicates growth of 4.3% from the year-ago figure.
The Marcus carries a Zacks Rank of 2 at present. MCS has a negative trailing four-quarter earnings surprise of 145.7%, on average.
The Zacks Consensus Estimate for MCS’ 2025 sales indicates an increase of 5.2% from the year-ago level.
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