PVH Stock Dropped On Lowered Guidance

Jianyu Zhao  |

Apparel-maker PVH Corp. (PVH) reported its Q1 2014 financial earning results after the bell on June 4, causing shares to fall 5.95 percent to $122.40 per share in after-hours trading (as of 5:52 PM EST.)

According to the financial report, PVH, the owner of the Calvin Klein and Tommy Hilfiger brands, cut its fiscal 2014 profit forecast on shaky consumer confidence. The company expected adjusted earnings of $7.30 to $7.40 per share, compared with the previous estimate of $7.40 to $7.50. The revenue for Q1, however, was up 4 percent to $1.964 billion. As for the fiscal 2014, the company forecast revenue of approximately $8.5 billion.

Bad Weather Blamed for Miss

In a statement PVH’s CEO Emanuel Chirico ascribed such a change to the “unseasonably cool weather” in North America and a “challenging” economic environment. 

“Unfortunately, the challenging macroeconomic environment has continued into the second quarter, with heightened promotional activity across the North American retail landscape,” he said. “We will continue to make the previously planned strategic investments, particularly in the acquired Calvin Klein businesses, in order to unlock the full global potential of the Calvin Klein businesses over the long-term.”

Meanwhile, PVH reported its net income of $35.3 million, or $0.42 per share in the quarter that ended May 4. The company purchased competitor Warnaco Group for $2.9 billion one year ago. Despite the deal led PVH lost $10.3 billion, it strengthened the control of the Calvin Klein brand.

In addition to owning the Calvin Klein and Tommy Hilfiger brands, PVH licenses products for brands including Speedo, Kenneth Cole New York and Sean John, making it one of the biggest apparel companies in the world. Calvin Klein and Tommy Hilfiger make up the majority of the company’s revenue, or 68.4 percent of the $1.694 billion total.

EVA Reports Still Look Strong

Revenue in the Calvin Klein business increased 4 percent to $665 million from $638 million on a non-GAAP basis in the prior year. Revenue for the North American business increased 3 percent driven by an additional ten days of operations for the businesses acquired with Warnaco on February 13, 2013, along with modest growth in both the wholesale and retail businesses. Revenue in the Tommy Hilfiger business increased 6 percent to $862 million as compared to $811 million in the prior year. There was a 5 percent increase in the Tommy Hilfiger North America business, due principally to low single-digit wholesale growth, 2 percent retail comparable store sales growth and retail square footage expansion.

According to EVA reports, PVH’s stock displays multiple strengths, such as its robust revenue growth, and good cash flow from operations. PVH’s revenue growth rate is 35.47 percent, which slightly outpaces the industry average of 16.8 percent. Net operating cash flow has a 25.96 year-over-year increase, up to $357.94 million. But the company’s cash flow growth rate is still lower than the industry average growth rate of 62.40 percent.

For the current quarter, PVH expects adjusted earnings of $1.40 to $1.45 per share, and revenue of approximately $2 billion.

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