Shares of Calvin Klein-Owner PVH Dip on Soft Outlook, Morgan Stanley Downgrade to Equal Weight

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Shares of Calvin Klein-Owner PVH Dip on Soft Outlook, Morgan Stanley Downgrade to Equal Weight
Credit: © Reuters.

PVH (NYSE: PVH ) released a weaker-than-anticipated full-year forecast, sending the company's shares in the red.

The company reported Q4 adjusted EPS of $2.84, compared to the loss per share of 38c in the year-ago period and topping the consensus estimates of $2 per share. Revenue came in at $2.43 billion, up 16% YOY and above analyst expectations of $2.37.

The Calvin Klein brand generated sales of $991.6 million in the period, also above the consensus projection of $948 million. Calvin Klein International revenue totaled $616.6 million, missing the analyst consensus of $622.9 million.

Tommy Hilfiger reported total revenue of $1.3 billion. Comparable sales at Calvin Klein and Tommy Hilfiger rose by 27% and 18%, respectively. PVH reported a Q4 gross margin of 58.3%, compared with the analyst estimates of 57.6%.

Moving forward, the company expects Q1 EPS in the range of $1.55 to $1.6 and expects a relatively flat revenue growth. PVH also expects the effective tax rate in Q1 to be in the range of 29% to 30%. For the full-fiscal 2023, PVH expects EPS of roughly $9 and revenue growth in the range of 2% to 3%.

"As we look ahead, we are confident in the strength and momentum in our business and our ability to drive strong underlying top and bottom line growth by leaning in to what is within our control, despite the significantly increased macroeconomic and geopolitical volatility over the last few months, including the war in Ukraine, the impact of the global pandemic, and the inflationary pressures we see across our regions," said Stefan Larsson, CEO of PVH.

Morgan Stanley analyst Kimberly C Greenberger downgraded PVH shares to Equal Weight from Overweight. A new price target is $89.00 per share, down from the prior $122.00.

The analyst expects to see range-bound trading amid a lack of near-term catalysts. Moreover, the EPS risk is heightened as 2H-weighted guide hinges on acceleration through the year.

The guidance is notably back-half weighted, which adds risk to full-year earnings, as it requires accurate forecasting into the future while the backdrop and economic forces remain volatile. All in, if the European situation proves more dynamic than currently contemplated, and/or if consumers are less receptive to ongoing price increases, PVH could observe an unexpected departure in earnings results relative to plan, Greenberger wrote in a memo.

Opposite of Greengerger, UBS analyst Jay Sole reiterated a Buy rating and his bullish stance on PVH with a new price target of $156.00 per share, down from $168.00.

"We think PVH has the brand strength and balance sheet to drive earnings growth over the long term, despite multiple macro headwinds. We forecast the company delivering a +DD% EPS CAGR post FY22. New CEO Stefan Larsson has only just begun executing his plan to improve PVH's profitability and we think there are major margin unlocks that will play out over the next few years," Sole wrote in the report.

PVH share price is down 1.5% in pre-open Thursday.

By Senad Karaahmetovic

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