PVH Corp. CEO Stefan Larsson said the parent of the Tommy Hilfiger and Calvin Klein brands delivered on its top- and bottom-line commitments and beat its earnings guidance for the second quarter, led by a disciplined execution of the PVH+ Plan.

“For both Calvin Klein and Tommy Hilfiger, we drove strong consumer engagement and continued to increase product strength and improve newness in our assortment, leading to more full-priced selling and less end-of-season clearance sales, which fueled significant gross margin expansion,” he commented.

Consolidated second-quarter revenue decreased 6 percent year-over-year (y/y) to $2.074 billion compared to $2.207 billion in the prior-year Q2 period. Revenues decreased 5 percent on a constant-currency (cc) basis, including a 3 percent decline resulting from the sale of the Heritage Brands women’s intimates business in November 2023.

Tommy Hilfiger
Tommy Hilfiger revenue decreased 4 percent (-3 percent cc) in Q2 compared to the prior-year Q2 period.

  • Tommy Hilfiger International revenue decreased 6 percent (-5 percent cc) y/y as the revenue decline in Europe discussed weighed more heavily on the Tommy Hilfiger business.
  • Tommy Hilfiger North America revenue increased 1 percent y/y in the second quarter.

Calvin Klein
Calvin Klein revenue decreased 1 percent (flat cc) in Q2 compared to the prior-year Q2 period.

  • Calvin Klein International revenue decreased 2 percent (flat cc) year-over-year.
  • Calvin Klein North America revenue increased 1 percent year-over-year.

Heritage Brands
Heritage Brands revenue decreased 60 percent compared to the prior-year Q2 period, which included a 56 percent decrease resulting from the sale of the Heritage Brands women’s intimates business.

International
Consolidated second-quarter revenue in the company’s International businesses decreased 4 percent (-3 percent cc) compared to the prior-year Q2 period, primarily due to the challenging consumer environment in Asia Pacific, particularly in China and Australia, and the continuation of the company’s planned strategic reduction in sales in Europe to drive overall higher sales in the region.

North America
In North America, revenue in the Tommy Hilfiger and Calvin Klein businesses combined increased 1 percent compared to the prior-year Q2 period, with modest growth in the wholesale business and a low single-digit decline in the direct-to-consumer business.

Direct-to-Consumer (DTC)
DTC revenue decreased 5 percent (-3 percent cc) compared to the prior-year Q2 period. DTC revenue in the company’s owned and operated stores decreased 4 percent (-3 percent cc) compared to the prior-year Q2 period, primarily driven by recent softness in the consumer backdrop.

DTC revenue in the company’s owned and operated digital commerce business declined 6 percent (-5 percent cc) compared to the prior-year Q2 period, due primarily to the continuation of the company’s planned strategic reduction in Europe.

Wholesale
Wholesale revenue decreased 9 percent (-8 percent cc) compared to the prior-year Q2 period, primarily due to a 7 percent reduction resulting from the sale of the Heritage Brands women’s intimates business. The remaining decline reflects the continued reduction in revenue in Europe to drive overall higher sales in the region.

“Step by step, we continue to build strength in product, consumer engagement and marketplace execution, supported by the build-out of our data and demand-driven supply chain,” Larsson continued. “North America continues to be a strong proof point. In Europe, we are on plan with our targeted quality of sales initiatives, and in the Asia Pacific, we continue to drive strong brand engagement to win the big consumer moments. Looking ahead, as we navigate an increasingly challenging global macroeconomic backdrop, we remain relentlessly focused on delivering brand-accretive, long-term growth.”

Income Statement Summary
Consolidated gross margin increased 250 basis points to 60.1 percent of net sales in the second quarter, compared to 57.6 percent in the prior-year Q2 period. The increase reflects benefits from a favorable shift in channel mix, a reduction in sales to lower margin wholesale accounts and lower product costs.

Earnings before interest and taxes (EBIT) amounted to $174 million in Q2, including a $4 million negative impact attributable to foreign currency translation, compared to $143 million in the prior-year Q2 period. EBIT included costs of $15 million in the current quarter and costs of $39 million in the prior-year Q2 period. EBIT on a non-GAAP basis for these periods excludes these amounts.

EBIT on a non-GAAP basis was $189 million, including a $4 million negative impact attributable to foreign currency translation, compared to $182 million in the prior-year Q2 period. The reported gross margin improvement more than offset the impact of the revenue decline in the quarter. The company said it continues to take a disciplined approach to managing expenses, driving cost efficiencies while making targeted investments to drive its strategic initiatives.

Earnings per share (EPS) was $2.80 per share in the second quarter, compared to $1.50 per share in the prior-year Q2 period. On a non-GAAP basis, EEPS was $3.01 per share in Q2, compared to $1.98 per share in the prior-year Q2 period.

EPS on both GAAP and non-GAAP bases for the second quarter of 2024 includes the negative impact of 7 cents per share related to foreign currency translation.

Interest expense decreased to $19 million from $24 million in the prior-year Q2 period.

The effective tax rate was negative 2.1 percent in Q2 compared to 21.3 percent in the prior-year Q2 period. The effective tax rate was negative 0.1 percent on a non-GAAP basis compared to 21.6 percent in the prior-year Q2 period on a non-GAAP basis. The decline in the tax rates on a GAAP and non-GAAP basis compared to the prior-year Q2 period is primarily due to a tax benefit in the current quarter related to the favorable settlement of a multi-year audit in an international jurisdiction.

Inventory
Inventory decreased 12 percent y/y compared to the prior-year Q2 period.

Stock Repurchase Program
Delivering on its commitment under the PVH+ Plan to return excess cash to stockholders, the company repurchased 200,000 shares of its common stock for $25 million during the second quarter of 2024, bringing total share repurchases for the first six months of 2024 to 2.1 million shares for $225 million. The company expects to make common stock repurchases under the stock repurchase program of approximately $400 million for the full year 2024.

2024 Full Year Outlook
“We drove strong gross margin and operating margin expansion in the second quarter and are reaffirming our revenue and non-GAAP operating margin guidance, reflecting our disciplined execution of the PVH+ Plan,” offered Zac Coughlin, CFO of PVH Corp. “We remain relentlessly focused on driving efficiencies, maintaining cost discipline and simplifying how we work globally. Powered by our two iconic brands, we have a multi-year unlock opportunity to generate sustainable, profitable growth and strong cash flows while maximizing returns for shareholders over the long-term.”

Revenue
PVH Corp. is reaffirming a projected decrease of 6 percent to 7 percent as compared to 2023, or a decrease of 6 percent to 7 percent on a constant-currency basis, inclusive of a 2 percent reduction resulting from the sale of the Heritage Brands women’s intimates business and a 1 percent reduction from the 53rd week in 2023.

Operating Margin
The company projects its operating margin to be approximately 9.8 percent compared to 10.1 percent in 2023. Previous guidance was approximately flat to 2023.

  • On a non-GAAP basis, the company is reaffirming its outlook of approximately flat compared to 10.1 percent in 2023.
  • Operating margin on a GAAP basis for these periods include the amounts described under Non-GAAP Exclusions later in this release. Operating margin on a non-GAAP basis exclude these amounts.

Earnings per Share (EPS)
Projected to be in a range of $11.20 to $11.45 compared to $10.76 in 2023. Previous guidance was a range of $11.15 to $11.40.

  • On a non-GAAP basis, EPS is projected to be in a range of $11.55 to $11.80 compared to $10.68 in 2023. Previous guidance was a range of $11.00 to $11.25.
  • The 2024 EPS projections include the estimated negative impact of approximately 5 cents per share related to foreign currency translation.

Interest expense is projected to decrease to approximately $70 million from $88 million in 2023, primarily due to the repayment in 2023 of the $100 million 7.75 percent debentures and an increase in interest income. Previous guidance was approximately $75 million.

Effective tax rate is projected to be approximately 16 percent, with the decrease from previous guidance of approximately 20 percent primarily attributable to the tax benefit resulting from the favorable settlement of the multi-year audit in an international jurisdiction.

Third Quarter 2024 Guidance

Revenue
Revenue is projected to decrease 6 percent to 7 percent compared to the third quarter of 2023, or a decrease of 7 percent to 8 percent on a constant-currency basis, inclusive of a reduction of 2 percent resulting from the sale of the Heritage Brands women’s intimates business.

Earnings per Share (EPS)
Approximately $2.30 compared to $2.66 in the prior-year Q2 period.

  • On a non-GAAP basis, EPS is approximately $2.50 compared to $2.90 in the prior-year Q2 period.
  • The third quarter EPS projections include the estimated positive impact of approximately 5 cents per share related to foreign currency translation.

The company projects interest expenses to decrease to approximately $17 million compared to $22 million in the third quarter of 2023 and the effective tax rate to be roughly 23 percent.

Image courtesy Tommy Hilfiger