What happened

Shares of PVH (PVH 0.04%) were surging today after the apparel company and owner of brands like Calvin Klein and Tommy Hilfiger posted better-than-expected results in its fourth-quarter earnings report.

As of 12:58 p.m. ET, the stock was up 19.7%.

Clothes hanging on a rack inside of a store.

Image source: Getty Images.

So what

In a difficult retail environment, PVH said that revenue in the fourth quarter rose 2%, or 8% in constant currency, to $2.489 billion, which easily beat estimates at $2.37 billion and its own guidance, which called for a decline in revenue of 4%.

Management called out the direct-to-consumer channel as a bright spot as DTC revenue rose 4%, while wholesale revenue was flat and digital revenue, which includes wholesale e-commerce, was down 8% against strong comparisons in the quarter a year ago. It also said Tommy Hilfiger and Calvin Klein helped drive the company's overall growth. 

Like many of its peers, the company is struggling with elevated inventory levels as inventory rose 34% compared with abnormally low inventory in the quarter a year ago. That led to a decline in gross margin from 58.3% to 55.9%, which the company blamed on higher costs and increased promotional activity.

As a result, adjusted earnings per share fell from $2.84 to $2.38, but that still beat expectations at $1.67.

CEO Stefan Larsson said, "Our disciplined execution of the PVH+ Plan, our multi-year, brand-focused, direct-to-consumer and digitally led strategy enabled us to compete to win despite the challenging macro situation."

Now what

PVH also offered solid guidance for 2023, calling for revenue to increase 3%-4%, ahead of the analyst consensus. It also sees an operating margin of 10% and earnings per share of $8.97 on an adjusted basis, which was even with 2022 results and slightly better than the consensus at $8.92.

Based on those results, the stock is trading at a price-to-earnings valuation of 10, even with today's jump, which helps explain why the stock rose on the news.