PVH Corp. turned in a strong start to its fiscal year — and its new PVH+ strategic plan — with better first-quarter sales and a big profit beat.
But the parent company to Tommy Hilfiger and Calvin Klein is still just getting down to work in its home market.
“Both Calvin and Tommy remain highly relevant with today’s consumer in the region,” chief executive officer told analysts on a conference call going over quarterly results. “However, we recognize that we’re on a multiyear journey to unlock the significant opportunities we have in the market.”
In addition to the lack of tourism in North America, PVH is facing continued supply chain backups.
“We continue to work through significant COVID[-19]-related inventory delays during the first quarter and we expect our inventory positions to gradually improve in the back half of this year,” Larsson said. “Despite these challenges, we see important progress in the region, including [that] we are driving significantly lower promotions and are able to sell through our products at higher AURs [average unit retail prices]. We are driving increased product strength through our hero product focus and the consumer is responding positively to newness for both Calvin and Tommy.”
The PVH+ strategic plan has the company aiming to boost revenues to $12.5 billion in 2025, up from $9.2 billion last year, and doing that by doubling down on brand. Key to the plan is developing “hero products” in key categories and then connecting those products to consumers at key moments and taking a digital-first approach.
At PVH, Larsson has plenty of brand power to work with.
In the first quarter, Tommy Hilfiger saw North American revenues increase 15 percent, while Clavin Klein’s revenues were up 26 percent in the market as business bounced back from a year ago.
(Overall, PVH drove its first-quarter net income up 33.2 percent to $133.1 million, or $1.94 a diluted share — 33 cents ahead of the $1.61 analysts had penciled in. Revenues for the three months ended May 1 rose 2 percent to $2.1 billion, an increase of 7 percent on a constant currency basis.)
Zac Coughlin, chief financial officer, noted on the call that: “In the first quarter, we delivered gross margin stronger than pre-pandemic levels at 58.4 percent. This compares to 59.1 percent in the prior year. We maintained our full-price selling and reduced promotions. We also implemented price increases in certain regions and in certain product categories to mitigate inflationary pressures, including higher costs of commodities and raw materials and increased cost of ocean freight.”
But those improvements were more than offset by air freight to move goods, which cost the company $12 million in the first quarter.
Coughlin said the company has “adjusted our buying cycle to account for increased lead times and ensure we will have the right product at the right time. As a result, our in-transit inventory levels are up 10 percent versus last year.”
While PVH continues to work on building up its brands and operations, it is also giving back something more to shareholders having repurchased 1.2 million shares for $100 million in the first quarter.
Zachary Warring, an equity analyst at CFRA Research, upgraded PVH shares to “buy” from “hold” and noted: “The company has $1.1 billion remaining on its current share repurchase program, which represents over 20 percent of the company’s market capitalization. With margins faring better than peers in Q1 and inventory remaining normal while peers over order, we now like the risk reward on PVH as the company continues to buy back shares.”
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