PVH Corp (PVH) Stock Up on Q2 Earnings Beat & Upbeat '21 View
PVH Corp (PVH) second-quarter fiscal 2021 results reflect gains from brand strength, particularly in Calvin Klein and Tommy Hilfiger.
PVH Corporation PVH reported second-quarter fiscal 2021 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate and improved year over year. The results gained from brand strength, particularly in Calvin Klein and Tommy Hilfiger.
Solid e-commerce performance drove growth. Revenues in digital channels surged nearly 35% year over year in the quarter under review.
Management raised its 2021 revenue and earnings guidance. Backed by the strong performance and upbeat view, shares of the Zacks Rank #3 (Hold) company have gained 7.2% in the after-hour trading session on Aug 31. In the past year, the company’s shares have surged 76.1%, compared with the industry’s rally of 33.5%.
PVH Corp reported adjusted earnings of $2.72 per share compared with the year-ago quarter’s earnings of 13 cents. The bottom line beat the Zacks Consensus Estimate of $1.19. On a GAAP basis, the company reported earnings of $2.51 per share against a loss of 72 cents in the prior-year quarter.
In the second quarter, revenues surged 46% year over year to $2,313 million. On a constant-currency (cc) basis, the metric improved 40%. The top line surpassed the Zacks Consensus Estimate of $2,137 million. We note that solid performance across all regions and channels aided the top line.
Direct-to-consumer revenues rose 19% year over year in the second quarter. Traffic in stores in the current year has improved significantly compared to prior year owing to reopenings and reduced occupancy restrictions. However, the company’s retail stores continue to face pressure due to the pandemic. During the fiscal second quarter, its certain stores in Europe, Australia and Japan were temporarily closed for varying periods of time. Meanwhile, wholesale revenues jumped 77% in the fiscal second quarter, driven by solid sales in Europe and sturdy digital demand from its traditional and pure-play wholesale customers.
The company’s gross profit amounted to $1,241.9 million, reflecting a sharp improvement from $833.8 million reported in the year-ago quarter. Gross margin expanded 180 bps to 57.7% owing to reduced promotions and robust performance across all regions. Meanwhile, adjusted selling, general and administrative expenses rose 20.4% year over year to $1,062 million. Adjusted earnings before interest and taxes totaled $294 million compared with $49 million in the prior-year quarter, driven by higher sales and improved margins.
PVH Corp reports financial results under three segments — Calvin Klein, Tommy Hilfiger and Heritage Brands.
Revenues for the Calvin Klein segment improved 56% year over year (up 50% at cc). While sales for Calvin Klein North America increased 75%, Calvin Klein International climbed 47%.
Revenues for the Tommy Hilfiger segment rose 41% year over year (up 35% at cc) in the reported quarter. Revenues were up 45% at Tommy Hilfiger North America and 40% at Tommy Hilfiger International.
The Heritage Brands segment’s revenues climbed 35% year over year in the quarter under review.
PVH Corp ended the quarter with cash and cash equivalents of $1,152.6 million, long-term debt of $2,782.5 million and stockholders’ equity of $ 5,032.8 million.
Despite continued uncertainty related to COVID-19, and the expectations for higher freight and logistics costs headwinds, management raised its fiscal 2021 view. The company’s outlook assumes the occurrence of higher freight and other logistics costs in the second half of fiscal 2021 to mitigate delays of four to six weeks on average for certain inventory orders. However, it has not incorporated any further supply chain disruptions in its outlook.
It expects earnings and revenues in the second half to reflect continued impacts from the pandemic. The company noted that it has been witnessing growth beyond the pre-pandemic levels of fiscal 2019 across its international business, which is anticipated to continue. However, the North American unit is likely to remain drab as international tourism is not likely to return to growth in fiscal 2021. It is to be noted that North America is a greater source of revenues in the region.
Gross margin is envisioned to improve for the remaining part of the year backed by less promotional selling and a favorable shift in regional sales mix.
For 2021, revenues are anticipated to be 26-28% year over year (up 24-26% on a cc basis), which suggests an improvement from the earlier view of 24-26% (indicating a 21-23% rise at cc). Adjusted earnings are now expected to be $8.50 per share compared with the prior view of earnings of $6.50. The figure compares favorably against an adjusted loss of $1.97 reported in 2020. The company expects adjusted net interest expense to be $105 million compared with $116 million in fiscal 2020. It anticipates an effective tax rate of 17-18%.
The adjusted earnings outlook excludes roughly $60 million of pre-tax costs related to restructuring actions, including lowering headcount in a few international markets, and reducing real estate footprint, comprising certain store closures and reduced office space. It also excludes $21 million of costs associated with the exit from the Heritage Brands Retail business and $110 million gain expected to be recorded for the Heritage Brands transaction.
For third-quarter fiscal 2021, management expects revenues to increase 11-13% year over year (up 29-31% on a cc basis). Adjusted earnings are likely to be $1.95-$2.00 per share, up from $1.32 reported in the prior-year quarter. The adjusted earnings view excludes $110 million gain related to the Heritage Brands transaction and $8 million of pre-tax costs associated with the aforementioned restructuring efforts. The company expects adjusted net interest expense to decline to $25 million compared with $32 million in third-quarter fiscal 2020. It anticipates an effective tax rate of 26-28%.
3 Key Picks
Columbia Sportswear Company COLM, which sports a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 33.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Crocs, Inc. CROX, a Zacks Rank #1 stock, has a long-term earnings growth rate of 15%.
Ralph Lauren Corporation RL has a long-term earnings growth rate of 15%. It currently carries a Zacks Rank #1.
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