PVH Gains on Q3 Beat, Signs of Progress in North America
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Wall Street liked PVH Corp.’s new look.
Shares of the company, parent to Tommy Hilfiger and Calvin Klein, increased 9.5 percent to $73.57 on Thursday after the company topped third-quarter expectations, showed “green shoots” in North America and moved to reclaim its licensed women’s wholesale business from G-III Apparel Group.
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On a conference call with analysts, Stefan Larsson, chief executive officer, connected much of the company’s success and plans for the future back to his PVH+ strategic plan, which has the firm focusing on “hero products,” thinking digitally first and building a demand-driven supply chain.
“Calvin in [South] Korea is a great example for how executing the PVH+ plan will drive strong impacts over time across all regions and markets,” Larsson said. “In Korea, we have taken the key growth drivers of the PVH+ Plan and made them come to life in a uniquely strong way, driving year-to-date revenue growth of plus 22 percent in local currency.
“We have accomplished this by leaning into our key product growth categories like underwear, denim, outerwear, big categories where we have the right to play to win,” the CEO said. “Within each of these, we have them focused on winning with the best hero products in the market, one concrete example being the modern cotton underwear program.”
The company then linked those efforts with marketing, including its collaboration with K-pop sensation Jennie Kim from Blackpink, and connected it all together on social media.
“Since the PVH plan growth drivers are the same across our brands and all regions, this Korea example is so valuable because it shows how we deliver results through disciplined execution of the plan,” Larsson said.
The CEO also called out success at Tommy Hilfiger, which he said “delivered brand heat, brand campaigns and immersive experiences, where the highlight was our return to New York Fashion Week, which kicked off with a multiverse Tommy Factory runway experience that launched our new Tommy Hilfiger monogram collection and included a star-studded guest list, generated global visibility and strong consumer engagement.
“We generated approximately 6.2 billion impressions from August to October, and approximately 27 million social engagements over the same period,” he said. “The Tommy Factory runway show ranked the number two on the list of the most talked-about shows in New York.”
In general, the company showed signs of progress in North America (it is also on the hunt for a new head of the region and leader for Calvin Klein).
“We are encouraged that our business is starting to show green shoots” in North America, the CEO said. “Although we recognize that we still have work to do to win more of the domestic consumer, we have doubled down on improving our own execution, and this quarter, we delivered double-digit growth for Tommy and Calvin, led by our D2C stores even against the soft consumer backdrop and intense promotional environment.”
The North American business will continue to change with PVH bringing its women’s wholesale licenses in house by the end of 2027.
“The rationale for [bringing the businesses in house] is very much connected to the PVH+ Plan and what that is about,” Larsson said. “Because in essence, the PVH+ Plan is a growth plan. It’s a brand-driven growth plan. So it’s about unlocking the full potential of our brands. And the brands, both Calvin and Tommy, the brands are the most valuable assets we have. So when we look at over time over the next few years in housing this, it’s about giving us complete control of those brands.”
While Wall Street was quick to get behind signs of strength at the company, Larsson still has some work to do to win over hearts and minds.
Ike Boruchow, an analyst at Wells Fargo, noted that bringing the licenses in house would help revenues, but said the impact on earnings before interest and taxes was “less clear.”
“While PVH is doing an admirable job to manage through the tough macro backdrop — i.e. costs cuts, improvements in the North American business — we believe the space will remain in a difficult place for the foreseeable future,” Boruchow said.
In the third quarter, PVH was hit by a $417 million pretax write-down in goodwill, but adjusted earnings per share totaled $2.60 and were 45 cents better than the $2.15 projected by analysts.
Revenues declined 2.2 percent to $2.28 billion, which would have been an increase of 7 percent in constant currencies.
The quarter was strong enough for PVH to boost its EPS projection for the year to $8.25 a share, up from $8.
