What happened
Shares of PVH (PVH +12.29%) were moving lower this week after the parent of apparel brands including Calvin Klein and Tommy Hilfiger offered disappointing guidance in its first-quarter earnings report.
According to data from S&P Global Market Intelligence, the stock was down 12.9% for the week as of Thursday at 12:36 p.m. ET.
NYSE: PVH
Key Data Points
So what
In its first-quarter earnings report yesterday, PVH said that revenue increased 2% to $2.158 billion, or 5% on a constant-currency basis, which topped the consensus at $2.12 billion.
Growth in the Asia-Pacific region was particularly strong, with revenue in constant-currency terms up 44% in China thanks to the end of COVID-19 restrictions.
Direct-to-consumer revenue, which reflects its own stores and websites, rose 8%, or 12% in constant currency, with owned-and-operated digital revenue up 4%. Meanwhile, wholesale revenue was down 2%, or up 1% based on constant currency, showing a sluggish environment for department stores and other retail partners.
Looking at the cost side of the equation, gross margin in the quarter slipped 50 basis points to 57.9% due to higher product costs. On the bottom line, earnings per share (EPS) rose 10% to $2.14, which easily beat estimates at $1.93. Adjusting for currency headwinds, EPS would have been $2.25.
The company credited the growth on top and bottom lines to its PVH+ plan, a comprehensive mission to elevate the Calvin Klein and Tommy Hilfiger lifestyle brands with a focus on marketing and the direct-to-consumer channel, along with efficiencies to deliver increased profitability.
Now what
Despite the better-than-expected results in the first quarter, investors seemed to be turned off by weak guidance for the second quarter.
For the full year, revenue is expected to increase by 3% to 4%, which was in line with analyst expectations. It also forecast 10% operating margins, and EPS of $10, compared to an adjusted total of $8.97 in 2022, which was even with the consensus at $10.03.
However, second-quarter guidance was on the lighter side, with EPS down from $2.08 to $1.70, and well below the consensus at $2.26.
Investors tend to overweigh near-term guidance and seem afraid that the second-quarter earnings decline could persist through the rest of the year.
Still, the stock could be a winner at a price-to-earnings ratio of less than 8 after today's sell-off, especially if it can grow earnings.
