PVH's Q1 Earnings Surpass Estimates, Stock Down on Slased FY25 View

PVH Corp. reported Q1 FY25 earnings of $2.30 per share, surpassing estimates, with revenues up 2% year-over-year to $1.984 billion. Despite the positive results, the company lowered its FY25 adjusted operating margin guidance to approximately 8.5% and EPS guidance to $10.75-$11, citing a $65 million negative impact from tariffs on goods entering the U.S.; consequently, PVH's shares fell 7.4% in after-hours trading.

Analysis

PVH Corp. reported first-quarter fiscal 2025 results that surpassed analyst expectations, with adjusted earnings per share of $2.30, a 6.1% year-over-year decline but ahead of the $2.24 consensus estimate, and revenues rising 2% year-over-year to $1.984 billion, also beating the $1.936 billion consensus. Despite this quarterly outperformance, which saw revenues exceed management's guidance of flat to down 2%, the company significantly lowered its full-year fiscal 2025 guidance. PVH now projects an adjusted operating margin of approximately 8.5%, a considerable reduction from the prior guidance of flat to slightly up from the 10% achieved in fiscal 2024, and revised its non-GAAP EPS forecast to $10.75-$11.00, down from $12.40-$12.75 and below the $11.74 delivered in fiscal 2024. This substantial guidance cut, which prompted a 7.4% decline in PVH's shares in after-hours trading, is primarily attributed to an anticipated $65 million unmitigated negative impact from U.S. tariffs, equating to roughly $1.05 per share for the full year. The company's first-quarter gross margin contracted by 280 basis points to 58.6%, negatively affected by an adverse channel mix, an elevated promotional environment, the transition of licensed women's categories to in-house wholesale, increased freight costs, and discounts related to Calvin Klein product delivery delays. Performance was mixed across channels and regions: direct-to-consumer revenues fell 3%, while wholesale revenues grew 6%; EMEA and Americas revenues increased by 5% and 7% respectively, but APAC revenues dropped 13%, partly due to Lunar New Year timing and a challenging Chinese market. PVH executed $561 million in share repurchases in Q1 but stated it does not project making additional buybacks in fiscal 2025. For Q2, PVH anticipates low-single-digit revenue growth and EPS of $1.85-$2.00, significantly lower than the $3.01 earned in the prior-year quarter, incorporating an estimated 20 cents per share tariff impact.

Key Decisions for Investors

• Investors should brace for continued pressure on PVH's profitability and stock valuation in the near term, given the substantially reduced FY25 operating margin and EPS guidance stemming largely from unmitigated tariff impacts and ongoing gross margin challenges.
• Carefully monitor PVH's ability to execute on its tariff mitigation strategies and realize benefits from its PVH+ Plan and Growth Driver 5 cost savings initiatives, particularly in the second half of fiscal 2025, as these will be critical for margin recovery.
• Reassess investment thesis in light of the significant downward revision in FY25 EPS outlook, the suspension of further share repurchases for fiscal 2025, and the divergent performance trends across geographic regions, notably the persistent weakness in APAC and the decline in direct-to-consumer sales.