PVH shares slide after deep cuts to sales, earnings guidance (NYSE:PVH)

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Calvin Klein’s parent PVH (NYSE:PVH) shares slid sharply on Thursday after the company failed to meet revenue expectations and cut its full-year earnings guidance.

The luxury brands giant missed second quarter’s revenue expectation while posting a decline of 7.8% year-over-year in net sales to $2.13B (flat on constant currency basis). However, a $2.08 adjusted earnings per share notched a beat on consensus estimate by $0.06.

By segment: Tommy Hilfiger revenue dropped 5% (international -9% and North America +6%); Calvin Klein revenue decline 1% (international -2% and North America -1%); and Heritage Brands sales was down 44% since the 37% decrease relates to the exit from the Heritage Brands Retail business.

On a constant currency basis, direct-to-consumer sales rose 3%, wholesale revenue down 3%, and digital revenue up 4% when compared with same period last year.

Gross Margin was 57.2% (vs. prior 57.7%), reflecting a negative impact of foreign currency translation of approximately 40 basis points.

EBIT on a non-GAAP basis was $211M, inclusive of a $29M forex negative impact, compared to $294M in the prior year period.

Summing up to the headwinds from rising U.S. dollar and inflationary pressures particularly impacting the wholesale customer demand in North America, PVH lowered its full-year guidance. It outlines:

FY 2022 Guidance: Revenue projected to decrease 4% to 3% as compared to 2021 (increase 3% to 4% on a constant currency basis), compared to an increase of 1% to 2% (increase 6% to 7% on a constant current basis) previously. The company pointed out this negative impact of 4% to a 2% reduction from Heritage Brands and exit and the remaining 2% from the impact of the war in Ukraine.

Operating margin is projected to be approximately 9%.

GAAP EPS now expected to be $7.64 compared to approximately $9.20 previously

Non-GAAP EPS of $8.00 compared to approximately $9.00 previously, and vs. consensus of $8.67

It includes increased negative impact of approximately $1.25 per share related to foreign currency translation compared to approximately $0.85 previously.

Q3 2022 Guidance: Revenue is projected to decrease 5% to 4% as compared to the prior year period (increase 4% to 5% on a constant currency basis), reflecting a 2% impact from war in Ukraine.

GAAP EPS forecasted to be in the range of $2.10 to $2.15, which takes in the estimated negative impacts of (i) ~$0.35 related to foreign currency translation and (ii) $0.18 per share related to the company’s businesses impacted in Russia, Belarus and Ukraine due to war.

PVH stock has been loosing its grip since quite some time as dropped 11% in the short term of last 3 months and down 41% in past 1-year.

Shares are down 9% to trade at $57.20 on Wednesday vs. 52-week range of $54.69 to $125.42.

At Hold Rating, Seeking Alpha author presents the case on PVH in an article titled “PVH: Potential For Significant Rebound Despite Risks.”

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