PVH Posts Q2 Beat, But Analysts Expect Softer Trends In US And China To Continue

Shares of PVH Corp PVH — the owner of Tommy Hilfiger, Calvin Klein, Warner’s, Olga and True & Co. — tanked Wednesday after the clothing company reported downbeat second-quarter earnings.

• Goldman Sachs analyst Brooke Roach maintained a Buy rating and price target of $144.
• JPMorgan analyst Matthew Boss reiterated an Overweight rating and price target of $154.

Check out other analyst stock ratings.

Goldman Sachs: PVH reported adjusted earnings of $3.01 per share, beating consensus of $2.29 per share, driven mainly by a 55 cents per share benefit from "an unplanned favorable tax settlement," Roach said.

Revenues declined by 6% year-on-year, but came in better than market expectations of a 6.3% contraction, she added.

PVH raised its full-year earnings guidance, but that was to reflect the tax benefit, and the company still expects a revenue decline of between 6% and 7%.

"The guidance also embeds an incremental [5 cent] headwind from FX and a more favorable interest outlook," Roach said.

The company released disappointing guidance for the fiscal third quarter, citing “an increasingly challenged global macroeconomic backdrop” and “softness in China and Australia."

JPMorgan: PVH's full-year guidance reflect a flow-through of the second quarter's tax benefit, Boss said.

Management has effectively "de-risked" the revenue and gross margin outlook for the back half "by using 2Q's ~$0.20 fundamental EPS beat as an offset," he added.

Management assumes that the softer trends witnessed exiting the second quarter, notably in the U.S. and China, would continue throughout the back half of the year, "in addition to embedding a potentially more promotional backdrop in 2H as a result of the dynamic macro backdrop," the analyst wrote. The guidance for adjusted earnings implies an operating margin contraction of around 150bps year-on-year at the midpoint, he further stated.

PVH Price Action: Shares of PVH had declined by 6.24% to $97.94 at the time of publication on Wednesday.

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