PVH Corp. (PVH, Financial) recently reported its first-quarter results for fiscal 2015 with earnings and revenues that beat the consensus estimate despite negative foreign currency headwinds and a challenging market environment. The company posted adjusted net income of $124.7 million or $1.50 a share for the quarter, up from the year-ago quarter’s net income of $122.1 million or $1.47 a share and surpassing the consensus estimate of $1.38 a share. Following the results, PVH Corp shares stood at $104.68 at closing bell, but continued climbing to the day’s high of $109 in after-hours trading.
Strong performance at Calvin Klein boosts revenues
PVH Corp. saw 4% year-over-year decline in revenues from $1.96 billion in the first quarter of fiscal 2014 to $1.88 billion in Q1 2015. However, the figure managed to surpass the consensus estimate of $1.86 billion. At the same time, PVH saw net GAAP income of $114.1 million or $1.37 a share compared to $35.3 million or $0.42 a share in the year-ago quarter. The apparel retailer attributed its results to the strong performance at the company’s Calvin Klein business. However, the company’s businesses took a hit as tourists spending in the U.S. dropped owing to the strong dollar.
Segmentwise, PVH saw 11% year-over-year decline in revenues from its Tommy Hilfiger business during the quarter to $767.1 million. While revenues from the U.S. dropped 2% compared to the prior-year quarter, revenues from the international segment slumped 17%. At the same time, PVH’s Calvin Klein business saw a 2% year-over-year dip to $653.9 million in Q1 2015. On the upside, the company’s Heritage Brands segment saw growth of 5% year-over-year to $458.3 million.
During the quarter, the company, which competes with other businesses such as Ralph Lauren Corp. (RL, Financial), Perry Ellis International Inc. (PERY, Financial) and Nine West Holdings Inc in the luxury apparel market also authorized a three-year, $500 million share buyback program.
The year ahead
Following the results, PVH Corp also provided guidance for the year ahead. The company projected second-quarter earnings in the $1.25 to $1.30 a share range on an 8% year-over-year decline in revenues. This compares poorly to the consensus estimate of earnings of $1.43 a share on a 4.6% year-over-year revenues drop. However, for the full fiscal, the company revised its earlier guidance of $6.75-$6.90 a share on a 4% drop in revenues and now expects to see 3% decline in revenues for FY2015, with EPS coming in at $6.85 to $6.95 a share. Consensus estimates peg the company’s full fiscal 2015 earnings at $6.86 a share on a 3.7% decline in revenues compared to the previous fiscal.
Final thoughts
PVH Corp reported better-than-expected revenues and earnings for the first quarter of fiscal 2015 on the back of strong performance at its Calvin Klein business. However, the company saw year-over-year decline in revenues as it continued to face the negative impact of foreign currency headwinds in the international market and lower tourist spending in the U.S. owing to the strong dollar. Although experts are looking at an average annual earnings growth rate of around 12.5% for PVH over the next five years, earnings for the current fiscal are likely see a drop. Consequently, the PVH Corp stock currently carries a "hold" guidance for the near-term and ‘buy’ guidance for the mid to long term.
