PVH Corp.: Initiate Sell Rating As FY24 Performance Is Going To Be Weak

seekingalpha04-24

PVH Corp. stock is recommended as a sell due to negative near-term outlook and macro headwinds in Europe.The company's largest brands, Calvin Klein and Tommy Hilfiger, have strong consumer appeal but ...

Source Link

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap

Leave a comment

{"i18n":{"language":"en_US"},"isChannel":false,"data":{"share":"https://ttm.financial/m/news/2429481834?lang=en_US&edition=fundamental","thumbnail":"https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1304694210/image_1304694210.jpg","is_english":true,"pubTime":"2024-04-24 16:29","share_image_url":"https://static.laohu8.com/5a36db9d73b4222bc376d24ccc48c8a4","id":"2429481834","market":"sh","top_or_hot":-1,"title":"PVH Corp.: Initiate Sell Rating As FY24 Performance Is Going To Be Weak","media":"seekingalpha","content":"<div>\n<p>PVH Corp. stock is recommended as a sell due to negative near-term outlook and macro headwinds in Europe.The company's largest brands, Calvin Klein and Tommy Hilfiger, have strong consumer appeal but ...</p>\n\n<a href=\"https://seekingalpha.com/article/4685559-pvh-corp-initiate-sell-rating-as-fy24-performance-is-going-to-be-weak\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>PVH Corp.: Initiate Sell Rating As FY24 Performance Is Going To Be Weak</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nPVH Corp.: Initiate Sell Rating As FY24 Performance Is Going To Be Weak\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-24 16:29 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4685559-pvh-corp-initiate-sell-rating-as-fy24-performance-is-going-to-be-weak><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>PVH Corp. stock is recommended as a sell due to negative near-term outlook and macro headwinds in Europe.The company's largest brands, Calvin Klein and Tommy Hilfiger, have strong consumer appeal but ...</p>\n\n<a href=\"https://seekingalpha.com/article/4685559-pvh-corp-initiate-sell-rating-as-fy24-performance-is-going-to-be-weak\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"PVH","symbol_name":"PVH Corp","start_time":0,"source_url":"https://seekingalpha.com/article/4685559-pvh-corp-initiate-sell-rating-as-fy24-performance-is-going-to-be-weak","article_id":"2429481834","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1304694210/image_1304694210.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2429481834","pubTimestamp":1713947350,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"PVH Corp. stock is recommended as a sell due to negative near-term outlook and macro headwinds in Europe.The company's largest brands, Calvin Klein and Tommy Hilfiger, have strong consumer appeal but ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"PVH":"PVH Corp","BK4585":"ETF&股票定投概念","BK4202":"服装、服饰与奢侈品"},"translate_title":"PVH公司：启动卖出评级，因为2014财年业绩将会疲软","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"PVH":1},"content_text":"PVH Corp. stock is recommended as a sell due to negative near-term outlook and macro headwinds in Europe.The company's largest brands, Calvin Klein and Tommy Hilfiger, have strong consumer appeal but face challenges in Europe.Despite a lower cost structure and margin expansion, the market is focused on growth recovery, limiting positive sentiment.   Robert Way Investment summary My recommendation for PVH Corp. (NYSE:PVH) is a sell rating, as I am negative on the near-term outlook of the business. PVH’s largest region exposure—Europe—continues to face strong macro headwinds that should continue to weigh on consumer spending confidence. This comes at a time when management decided to do a self-inflicted growth headwind of 500 bps. While the business seems to have a lower cost structure today, I don’t expect the market to give credit for this positive development until there is more visibility for growth. Business Overview PVH has two key brands in its portfolio: Calvin Klein [CK] and Tommy Hilfiger [TH], contributing $3.914 billion and $4.824 billion, respectively. Geography-wise, PVH has the majority of its exposure in the United States (29% of FY23 sales) and Europe (48%), collectively representing ~77% of total revenue. The remaining are split between 18% in Asia, 4% in Canada, and 1% in other markets. PVH's competitive moat is hard to specifically point out as it depends on the perceived value of its brands. However, based on Brand Finance, PVH two key brands rank in the top 50 brands in 2023: CK ranks 44 and TH ranks 37, which gives a sense of how attractive it is to consumers (the higher the better). PVH recently reported its 4Q23 earnings (on April 1st), where it saw a constant currency revenue decline of 1% to $2.49 billion. Gross margin came in at 60.3% (~442 bps improvement vs. 4Q22), driving EBIT growth to $301.4 million (~40% growth), which represents an EBIT margin of 12.1% (347 bps expansion vs. 4Q22). Poor performance outlook for the near-term I have a negative view on PHV performance for the near term, as its performance in Europe is expected to see major headwinds, given that the macro outlook remains bleak. The major countries within the European region continue to face higher-than-average inflation rates (Germany at 3.1%, the UK at 4.2%, and France at 3.4%) that have proven to be more sticky than expected. This is going to continue weighing on consumer sentiment, which management has specifically called out as slowing in the first 2 months of 2024, in Germany and the UK in particular. The weak demand environment can also be seen from the cautious ordering patterns of wholesale partners; the weak ordering trend suggests they are not confident in a demand recovery. Given that wholesale is about half of the business, this is going to continue weighing on the company’s overall sales performance, and management expects wholesale headwinds to persist into FY24. In addition, while this might be a good decision for the long term, the management decision to stop selling to smaller third-party digital platforms in mid-2024 is another major headwind to growth (expected to be 500 bps headwind to PVH’s European business, or ~250 bps at the consolidated level). With a poor demand outlook in wholesale, I assume the DTC business follows a similar trend, as management sort of hinted that the biggest markets are dragging down growth based on their reply to a question related to DTC expectations for Europe in FY24. So let me start with your question, Michael, about the D2C expectations for Europe for the rest of the year. It doesn't have to stay this way. What we are doing is we are guiding based on what we see, we see a consumer slowdown in Europe especially on our two biggest markets, Germany and the UK in January, February. So what we're doing is we are making sure that the focus is on quality of sales and we are pulling the inventory down to the trends we see right now. And then, of course, if these changes, we are able to react into that and to follow the demand. But our strategy will always remain the same which is to follow the demand that we see from the consumer and to do it in an increasingly profitable way. 4Q23 earnings The next largest region, the US, is also facing macro pressure, making it uncertain whether the Fed will cut rates in the coming months. My view is that even if the Fed cuts rates, consumer spending is unlikely to recover strongly, as rates are still relatively high compared to recent years. In FY23, the US saw a 4.9% growth decline, and if we assume a similar decline for FY24, this translates to a growth decline of at least ~4% from Europe Wholesale's growth headwind (250 bps) and US growth decline (490 bps * 29% of FY23 sales mix = 1.4% headwind). Adding on top of this is the pressure from Europe's DTC business, which I believe bridges my 4% revenue decline expectations to management’s FY24 sales guide of 600 to 700 bps decline. Lower cost structure is good, but not enough to drive positive sentiment That said, I give credit to management’s ability to drive EBIT margin expansion despite flattish reported growth. This bodes well for PVH to achieve its long-term target of 15% EBIT margin (290bps more than 4Q23 levels). Their FY24 EBIT margin guide also suggests that management has managed to drive down the business cost structure, as the EBIT margin is expected to be flat against 6-7pts of revenue decline. This has huge implications for the incremental margin when demand returns. I would expect PVH to see strong margin expansion when the topline starts to grow on the back of a macro recovery. However, this is unlikely to get priced in by the market because of the poor growth outlook, in my opinion. It doesn’t matter if the cost structure continues to go down (driving up margins) if growth continues to decline. Hence, looking ahead, I think the stock remains range-bound until there is more visibility to top-line growth recovery. Valuation to see pressure   Redfox Capital Ideas I model PVH using a forward PE approach, and using my assumptions, I believe PVH is worth $93. My model forecasts PVH 1-year forward to derive my estimated FY24e earnings figure based on management guidance. I believe the guide is a good indicator of FY24 growth because PVH has generally tracked well against the midpoint of its revenue guidance (<1% range). Assuming the midpoint of a 6.5% decline, FY24 is expected to generate ~$8.6 billion in revenue. I expect margins to stay flat, in line with the guidance of flat EBIT margins, which I think is possible looking at how they performed in 4Q23, and this translates to my FY24 net income estimate of $612 million. Relative to peers in the industry such as Ralph Lauren, Oxford Industries, Gildan Activewear, and Columbia Sportswear, PVH screens poorly in terms of near-term growth (-6 to 7% growth vs. peers at low-single-digit growth), and because of this, I believe the market will continue to attach a discount to PVH’s multiple. Currently, these peers are trading at an average of ~low-teens forward PE; hence, I think it makes sense for PVH to trade at its current forward PE of 9.4x. Risk Underlying macro conditions could recover a lot faster than what the current macro indicators reflect, as these indicators are backward-looking. Suppose growth recovers faster than what the market expects. PVH could beat consensus expectations, thereby driving very positive sentiment as the market starts to price in the strong earnings growth outlook (due to the strong incremental margin). Valuation multiple could also go up to peers’ level on the back of a strong earnings outlook. Conclusion  My view for PVH is a sell rating. My view is that PVH faces headwinds from weak consumer spending in Europe, its largest market, and management's decision to stop selling to smaller online retailers further limits growth. While a lower cost structure improves long-term profitability, I believe the market is focused on growth recovery rather than margins at the moment (judging from the share price movement). In other words, the market is unlikely to reward margin improvement until there are signs of a recovery in consumer spending.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2429481834"}