PVH Corp. (PVH, Financial) experienced a downturn, dropping 23% following its Q4 (January) financial report. Despite surpassing expectations in earnings per share (EPS) and revenue, the fashion giant—known for Calvin Klein and Tommy Hilfiger—issued future guidance for Q1 (April) and the full year significantly below analyst forecasts. Although PVH announced a $2 billion boost in its share repurchase program, the move did little to mitigate concerns over the disappointing outlook. The company also finalized the sale of its intimate apparel division, aiming to concentrate on its primary brands.
Q4 revenue remained steady year-over-year at $2.49 billion, with a slight 1% decrease when adjusted for currency changes. In North America, combined revenue for Tommy Hilfiger and Calvin Klein fell by 2%, despite robust growth in direct-to-consumer sales. This was primarily due to a decline in wholesale revenue, as partners exercised caution. Internationally, sales rose by 4% year-over-year, driven by strong performance in the Asia Pacific region, which overshadowed the challenging macroeconomic conditions in Europe, especially within the wholesale sector. Notably, gross margin improved to 60.3% from 55.9% in the previous year, benefiting from lower freight costs, a favorable shift in regional and channel mix, and reduced product costs.
Direct-to-consumer revenue saw a 9% increase year-over-year, with growth across all regions in both physical stores and digital commerce. Digital commerce revenue alone climbed by 10%. However, wholesale revenue dipped by 10% year-over-year, including a 3% decrease related to the sale of the intimates business, as wholesalers remained cautious.
The company's cautious stance is reflected in its 2024 guidance, anticipating a 6-7% decline in revenue. This outlook is influenced by weakened consumer sentiment in January and February, particularly in Europe's largest markets, Germany and the UK, leading to increased caution among wholesale partners. Nonetheless, PVH expects low single-digit growth in its North American Calvin Klein and Tommy Hilfiger businesses, with mid-single-digit growth in direct-to-consumer sales. The Asia Pacific region is projected to achieve high single-digit growth on a constant currency basis, despite the further slowdown in European consumer sentiment.
The negative reaction to PVH's guidance highlights investor concerns as the company concludes FY23. With both wholesale and the European market presenting significant challenges, the outlook for consumer-related stocks appears uncertain as the Q1 earnings season approaches.
