PVH Corp Bounces Back Stronger Than Ever
PVH Corp (NYSE: PVH) was not alone when it decided to suspend the dividend last year. The move was an aggressive attempt to sustain capital in the face of the COVID-19 pandemic and one that helped the business weather the storm. What makes PVH Corp different from others in this group is that it has yet to reinstate the dividend. While most of its kin are either incrementally increasing their dividends and expected to return to pre-COVID levels or already paying dividends above those levels, PVH Corp remains silent but we think that could change very soon.
The company's business bounced back strongly in the wake of the re-openings and cash flow is good. The company already paid back the borrowings incurred in 2020 and the balance sheet is strong as well. Marketbeat.com dividend data shows the pre-pandemic payout of $0.14 annually is a mere 2% of the company's guidance which opens the door in our view for not only a resumption of payments but for an increase versus the pre-pandemic payouts as well. Looking at the chart, it looks like the market agrees with this assessment. Shares are up roughly 15% in the wake of the news and on track to set a two-year High. With business expected to exceed the 2019 Levels by the end of the year, we expect to see share prices exceed their all-time high by the end of the year.
PVH Corp Had A Great Quarter
PVH Corp had a great quarter driven by strength in all categories. The only negative that we can turn up, and it's not that big a deal in our opinion, is that revenue is down -2% versus 2019. That aside, the $2.31 in consolidated revenue is up 46.2% from last year and beat the consensus estimate by 800 basis points. On a segment basis, the Calvin Klein brand led with growth of 56% followed by a 41% gain by Tommy Hilfiger and a 37% gain by the Heritage Brands collection. eCommerce, a driving force of the current retail environment, grew 35% over last year and accounted for 25% of revenue. Revenue in the direct-to-consumer channels grew by 19% but was outpaced by a 72% gain in the wholesale channels.
The company's gross margin came in at 57.7% or up 180 basis points from last year. The gain is due primarily by a decrease in promotional activity offset by upward price pressures that are so far being mitigated. Margins are also benefiting from reduced inventory. Inventory is down 13% leaving the company an optimal position to focus on the best selling and highest margin items later in the year. Moving down to the bottom line, the revenue and margin strength can clearly be seen in the earnings which outpaced the consensus by wide margins. The GAAP EPS of $2.12 beat consensus by $1.49 while the $2.72 in adjusted earnings beat by $1.52.
Turning to the guidance, this is the news that really got the market excited. The company increased its outlook for both the third quarter and the full year with full-year earnings expected to be $8.50 on an adjusted basis. This compares to the prior guidance of $6.50 and the consensus of $6.75 which qualifies as a wow figure in our opinion.
The Technical Outlook: PVH Corp Is Set To Extend Rally
Shares of PVH Corp rocketed up by 15% In the wake of the report and look ready to set fresh two-year highs. While resistance at the current two-year high has capped gains the indicators are bullish and suggest a strong movement is about to occur. Assuming price action Is able to move above the $121 level, we see this stock extending the rally up to the $170 level at least for a gain of 40%.
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