3 Ways Tommy Hilfiger Owner PVH Corp Looks Dressed For Success


Second Quarter Financial Results Release August 31, Apparel Company PVH Corp (NYSE: PVH), formerly known as the Phillips-Van Heusen Corporation, revealed revenue and profits that exceeded analysts’ estimates. The company, which owns or licenses world-famous brands such as Calvin Klein, Tommy Hilfiger, Michael Kors and Kenneth Cole New York, outperforms pre-2019 pandemic results, and management predicts better-than-ever results. planned for the whole year. . Three signs show that this optimism is justified.

1. The company even exceeds its own expectations

Bouncing at lightning speed from the lows caused by COVID-19 lockdowns, PVH surprised not only Wall Street but its own leaders with the force of its recovery. Revenue for the fiscal second quarter increased 46% year-on-year, although this figure was still around 2% lower than the revenue for the same quarter in 2019. Adjusted earnings per share (EPS) was multiplied by more than 20, from $ 0.13 to $ 2.72 over one year. . This net income also significantly exceeded previous management forecasts for adjusted earnings of just $ 1.15 to $ 1.18 per share.

Image source: Getty Images.

The gains are not accidental, according to CEO Stefan Larsson, who said the success was “driven by disciplined execution of our key strategic priorities, led by Calvin klein and Tommy Hilfiger and our international markets “.

In light of this strength, PVH has raised its forecast for fiscal year 2021. Adjusted EPS, previously set at $ 6.50 for the year, is now expected to hit $ 8.50. The company also continues to reduce underperforming brands and intellectual property. It finalized the sale of Heritage Brands to privately held Authentic Brands Group in August, bolstering its already strong cash position with an additional $ 223 million.

Although the spin-off was closed after the end of the second quarter, the recent earnings report indicates that $ 200 million of the proceeds from the sale will go towards repurchasing shares, reducing dilution and increasing share value for shareholders.

2. It improves both its margins and its debt

Thanks in part to a 35% increase in digital revenues (although physical retail sales are also increasing and prices are favorable), margins are also increasing for the company. These results are boosted by pricing power, weaker promotions and higher retail productivity, ”according to Larsson’s comments on the earnings call. Gross margin was 57.7% in the quarter, up from 2020 and 2019, proving in concrete terms that PVH’s strategies are boosting its performance.

The company is overflowing with cash and has used part of its reserves to pay off debt. PVH deleveraged an additional $ 200 million in the last quarter, bringing total debt repayment in the first half of fiscal 2021 to $ 700 million. That, the company says, is enough to offset its borrowing from last year. Net interest expense is expected to rise from $ 121 million in 2020 to $ 105 million in 2021. With these latest measures, PVH has freed itself from most of the lingering effects of 2020 on future performance, and it is not. not the excessive debt burden of many other companies. are still grappling with the wake of COVID-19.

3. It looks like supply chain difficulties and COVID-19 have been resolved

In its press release, PVH notes that its optimistic forecast is “despite” the uncertainty surrounding the effects of COVID-19 in the second half of the fiscal year. The company is investing heavily in growing its digital business, and it expects this to make operations more efficient, counteract issues related to rising commodity prices and the supply chain, and further reduce costs.

Corporate Controller Jim Holmes said during the earnings call that PVH is experiences supply chain delays of four to six weeks, ”but added that the company expects“ inventory levels to return to roughly up to future sales growth projections ”by now the end of 2021. Inventories were down 13% year over year for the quarter, reflecting good sales.

Overall, PVH appears to have overcome many of the challenges of the past year. With solid income, plenty of cash and a strategy in place, investors should be optimistic about this leader in the apparel industry.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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