PVH Corp. (PVH) shares plummeted after the company released its second-quarter financial results, which showed a beat on earnings but a disappointing revenue outlook and lowered earnings guidance for the third quarter. The news sent shockwaves through the market, leading to a significant decline in the company’s stock price.
Here’s a breakdown of the key figures from the report:
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Earnings:
PVH reported quarterly earnings of $3.01 per share, exceeding the analyst consensus estimate of $2.29 by a substantial 31.44%. This positive performance was a bright spot in the report.*
Revenue:
The company’s quarterly sales came in at $2.074 billion, beating analyst expectations. However, this represented a 6.03% decrease compared to the same period last year. The decline in revenue was attributed to a challenging consumer environment in key regions, particularly in Asia Pacific, where China and Australia experienced significant weakness. The company also highlighted the impact of strategic sales reductions in Europe, aimed at driving higher-quality sales in the region.*
International Business:
Revenue from the company’s international businesses decreased by 4% year-over-year. The challenging consumer environment in Asia Pacific and the planned strategic sales reduction in Europe contributed to the decline.*
North America:
In North America, the company’s Tommy Hilfiger and Calvin Klein businesses experienced a combined 1% increase in revenue compared to the prior year. This growth was driven by modest gains in the wholesale business, offset by a low single-digit decline in the direct-to-consumer business.*
Direct-to-Consumer:
Direct-to-consumer revenue decreased by 5% compared to the previous year, impacted by the company’s strategic reduction in Europe and a softening consumer backdrop.*
Owned and Operated Stores:
Revenue from the company’s owned and operated stores decreased by 4% year-over-year, primarily attributed to recent consumer spending softness.*
Digital Commerce:
Revenue from the company’s owned and operated digital commerce business declined by 6% compared to the previous year, primarily due to the continuation of the company’s planned strategic reduction in Europe.While PVH exceeded earnings estimates, the company’s outlook for the third quarter was a major cause for concern. PVH expects revenue to decline by 6% to 7% in the third quarter, and earnings per share are projected to be around $2.50, significantly lower than the $3.12 analyst estimate. Despite the cautious outlook for the third quarter, PVH reaffirmed its fiscal year 2024 revenue decrease guidance of 6% to 7% and raised its earnings outlook from $11.00 to $11.25 per share to $11.55 to $11.80 per share.
“We delivered on our top- and bottom-line commitments and beat our earnings guidance for the second quarter, led by our disciplined execution of the PVH+ Plan,” commented Stefan Larsson, CEO of PVH. “For both Calvin Klein and Tommy Hilfiger, we drove strong consumer engagement and continued to increase product strength and improve newness in our assortment, leading to more full-priced selling and less end-of-season clearance sales, which fueled significant gross margin expansion.”
Despite the positive aspects of the report, the weak revenue outlook and lowered earnings guidance overshadowed the earnings beat, prompting investors to sell off PVH shares. As of the time of publication on Tuesday, PVH shares were down 7.29% after-hours, trading at $96.85.
This report highlights the challenges facing the retail industry as consumer spending continues to be impacted by macroeconomic headwinds. The performance of PVH in the coming quarters will depend heavily on the company’s ability to navigate these challenges, maintain its growth strategies, and improve its revenue outlook.
