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    PVH Corp (PVH)

    Q1 2025 Earnings Summary

    Reported on Jan 16, 2025 (After Market Close)
    Pre-Earnings Price$123.75Last close (Jun 5, 2024)
    Post-Earnings Price$124.33Open (Jun 6, 2024)
    Price Change
    $0.58(+0.47%)
    • PVH achieved record-setting gross margins in Q1, with gross margin over 61%, an all-time high, driven by the PVH+ Plan execution and quality of sales initiatives. They project the full-year gross margin to be around 60%, also an all-time high, demonstrating ongoing profitability improvements.
    • Significant margin expansion and profitability improvement in North America, with an EBIT margin of 10.5% for Tommy Hilfiger and Calvin Klein combined in Q1. This marks the third consecutive quarter of over 500 basis point margin improvement, increasing confidence in achieving low-teens operating margins in North America.
    • Positive trends in European wholesale business, with sequential improvements in pre-spring '25 orders and very positive reactions from partners on fall '24 product improvements for both Tommy and Calvin. This indicates potential for future growth in Europe despite a tough macro environment.
    • PVH's European operations are facing significant macroeconomic challenges, especially in key markets like the UK and Germany, leading to a decline in revenue. In the first quarter, sales in the European business were down 12% in euros, and wholesale partners remain cautious. This ongoing weakness in Europe could continue to negatively impact the company's overall performance.
    • There is significant management turnover in the European division, with the departure of Martijn Hagman, CEO of Tommy Hilfiger Global and PVH Europe. Leadership changes during challenging times could potentially disrupt operations and hinder the execution of strategies necessary to navigate the tough macroeconomic environment.
    • Despite achieving significant gross margin expansion in the first quarter, PVH expects these gains to moderate in the coming quarters. Additionally, SG&A expenses are projected to increase as a percentage of revenue due to higher DTC mix and deleveraging on lower revenues, which may pressure operating margins if revenue growth does not materialize amid a challenging market.
    1. Gross Margin Outlook
      Q: What's the outlook for gross margin improvement?
      A: The company achieved an all-time high gross margin of over 61% in Q1, driven by improved product mix, pricing power, and cost reductions in sourcing. They expect continued gross margin expansion throughout the year, with full-year gross margin projected around 60%, also an all-time high. This improvement is supported by the PVH+ Plan initiatives in product innovation and supply chain enhancements.

    2. North America Profitability
      Q: How did North America profitability improve this quarter?
      A: North America delivered significant operating margin improvement, with an EBIT margin of 10.5%, up over 500 basis points for the third consecutive quarter, and nearly 1,000 basis points in Q1 alone. This was driven by growth in both Calvin and Tommy across all channels, gross margin expansion of 400–500 basis points due to better product and lower discounts, and SG&A reductions of 400–500 basis points from efficiency improvements.

    3. PVH+ Plan Progress
      Q: What's the progress and future potential of the PVH+ Plan?
      A: The PVH+ Plan is showing strong traction, particularly in brand engagement and product improvements for Calvin and Tommy. Leadership changes, including bringing in Lea as Tommy Global President, are accelerating innovation. Early results in North America and Asia are promising, with significant growth potential ahead. The company is confident in their path to achieving a 15% operating margin long-term, supported by continued execution of the plan's five growth drivers.

    4. Europe Market Outlook
      Q: How is performance in Europe amid quality sales initiatives?
      A: Despite a tougher consumer backdrop, especially in the UK and Germany, the company is focusing on quality sales actions, like reducing clearance sales by 50% and increasing new spring season sales by 10%. Early indications from prespring 2025 wholesale order books show sequential improvements versus fall 2024, signaling positive trends ahead. Leadership changes aim to strengthen execution in the region.

    5. Inventory and Supply Chain
      Q: How are inventory levels and supply chain initiatives progressing?
      A: Inventory levels are down 22% compared to last year, with better availability and improved planning, buying, and allocation. The rollout of RFID technology is enhancing inventory visibility, enabling more precise allocation based on demand signals. Currently, 30% of inventory in D2C is allocated based on demand, contributing to optimization and supporting gross margin improvement.

    6. Digital Channel Performance
      Q: What's impacting digital sales growth, and what's the outlook?
      A: While the digital channel remains important with strong growth in North America and Asia, overall digital sales were down 5% in constant currency in Q1 due to a deliberate pullback in Europe from certain third-party platforms as part of quality sales initiatives, and a focus on full-price sales over discounting on own e-commerce platforms. The company expects digital growth to continue in key focus areas moving forward.

    7. Brand Engagement and Marketing
      Q: How are brand engagement efforts contributing to performance?
      A: Brand engagement for Calvin and Tommy is at sector-leading levels, with strong consumer engagement and brand love driving desirability. Marketing investment as a percentage of sales is up, focusing on impactful campaigns and connecting with culture through high-profile talent. This increased engagement is expected to drive stronger product execution, marketplace performance, and gross margin expansion over time.