Recently, Phillips-Van Heusen Corp (PVH), the parent company of Calvin Klein, a renowned American fashion retail group (NYSE: PVH), announced its performance for the first quarter of the fiscal year 2024, ending on May 5th, and updated its annual outlook.
Overall, PVH Group reported a 10% year-on-year decrease in revenue for the first quarter, totalling $1.952 billion (9% decrease based on fixed exchange rates), which exceeded expectations (approximately 11% decline, about 10% decline based on fixed exchange rates). This decline included 3% attributed to the sale of the Heritage Brands women's lingerie business in 2023.
Furthermore, the group's gross margin for the first quarter increased by 350 basis points to 61.4%, compared to 57.9% in the same period last year. This growth reflects favourable shifts in the channel mix, reduced sales to low-margin wholesale accounts, and lower product costs. Earnings per share (EPS) stood at $2.59, surpassing the expected $2.15. Additionally, due to the company's proactive inventory management, inventory decreased by 22% compared to the same period last year, meeting expectations.
As of the closing on June 5th, PVH Group's stock price rose by 3.77% from the previous day, accumulating a 60.8% increase in the past 12 months. The latest market capitalization is $7.006 billion.
Regarding the first-quarter performance for the 2024 fiscal year, Stefan Larsson, CEO of PVH Group, commented: "We achieved revenue expectations, with the most significant growth coming from direct-to-consumer businesses, surpassing profitability expectations for the first quarter. We further strengthened brand positioning and pricing power, achieving growth for the Calvin Klein brand in North America and the Asia-Pacific region based on fixed exchange rates, while successfully driving strategic sales quality improvements in Europe."
Stefan Larsson added, "Although we are still in the process of building Calvin Klein into the world's most popular lifestyle brand, we have created the highest consumer engagement in the brand's history. We continue to work diligently across all five growth drivers of the PVH+ plan, promoting strong growth in key product categories and star products, and significantly improving gross margins. This success is attributed to our demand-driven supply chain development, targeted growth investments, and cost efficiency achieved through streamlined working methods."
Zac Coughlin, Chief Financial Officer of PVH Group, stated: "We achieved strong first-quarter performance, including robust gross margin growth and double-digit earnings per share growth, as we continue to prudently manage our business. Despite the ongoing challenging global macroeconomic environment, we reiterated our full-year revenue outlook and raised earnings per share expectations, reflecting our confidence in executing the PVH+ plan. We expect to generate substantial cash flow this year and have allocated approximately $200 million for share repurchases in the first quarter, demonstrating our commitment to creating value for shareholders and our confidence in driving sustainable, long-term, profitable growth."
In the market view, PVH Group's international business overall saw a 9% decline in revenue compared to the same period last year. Although revenue in the Asia-Pacific region achieved stable growth, this was offset by the decline in revenue in the European region (where the decline in European performance includes planned, strategic decreases to drive overall higher-quality sales).
In North America, consolidated revenue for Tommy Hilfiger and Calvin Klein businesses grew by 3% compared to the same period last year, including moderate growth in both direct and wholesale businesses, along with the beneficial impact of advancing wholesale shipments from the second quarter to the first quarter.
In terms of channels, revenue from direct-to-consumer channels grew by 1% compared to the same period last year, 3% growth based on fixed exchange rates. Revenue from company-operated stores increased by 3% compared to the same period last year, 5% growth based on fixed exchange rates, with growth seen across all regions. However, revenue from the company's digital commerce business declined by 6% compared to the same period last year (5% decline based on fixed exchange rates), with growth in North America and the Asia-Pacific region offset by planned reductions in European performance.
Wholesale channel revenue decreased by 17% compared to the same period last year (17% decline based on fixed exchange rates), primarily due to a 6% decrease in revenue resulting from the sale of the Heritage Brands women's lingerie business, as well as the impact of strategic initiatives for driving higher-quality sales in Europe. Additionally, wholesalers continued to adopt a cautious approach, particularly in Europe.
Looking ahead to the fiscal year 2024, PVH Group anticipates a 6% to 7% decline in revenue compared to the 2023 fiscal year (a 6% to 7% decline based on fixed exchange rates), including a 2% decline related to the sale of the Heritage Brands women's lingerie business and a 1% decline compared to the 53rd week in 2023. The operating profit margin is expected to remain approximately at 10.1% from the 2023 fiscal year. Earnings per share (GAAP basis) are expected to range between $11.15 and $11.40, compared to $10.76 in the 2023 fiscal year. The previous guidance range was $10.75 to $11.00.
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