Finance | News
| Paris, 2 April 2024
Estimated reading time: 3 minutes
In an unexpected turn of events following a rather positive year-end, fashion giant PVH Corp, which owns prestigious brands such as Calvin Klein and Tommy Hilfiger, saw its shares plummet by nearly 23% before Tuesday’s market opening.
This sudden drop follows annual forecasts announcing revenues and profits well below expectations, with the European market proving particularly challenging to navigate.
According to the latest data from the London Stock Exchange Group (LSEG), PVH Corp expects a 6 to 7% decrease in its revenue for the fiscal year 2024, a bleaker forecast than the anticipated 2.3% decline by analysts.
These forecasts include the impact of the discontinued sale of their women’s lingerie division.
“Such a drop is a disappointment, especially for a company that exuded confidence after encouraging third-quarter results,” noted John Kernan, analyst at TD Cowen.
The fourth quarter was also unforgiving to the fashion conglomerate: wholesale revenues decreased by 10%.
Retailers in North America and Europe, cautious in the face of uncertain economic conditions, adopted a prudent approach, thereby reducing their orders.
PVH Corp finds itself confronted with a tense European situation, where CEO Stefan Larsson asserts a particular focus on “the quality of sales to solidify our market-leading position.” This remains crucial as Europe accounts for nearly half of the company’s revenue.
The North American market is also not spared.
Brands like PVH, Levi Strauss, and Ralph Lauren are experiencing a slowdown in wholesale orders due to shrinking consumer demand, severely impacting department stores and other retailers.
However, PVH remains optimistic about its annual operating margin, anticipating earnings per share between $10.75 and $11.00, even though analysts had expected an average profit of $11.89.
Interestingly, despite this tumultuous period, PVH exceeded expectations with its quarterly sales and profits, attributing this success to strong holiday demand and more astute inventory management.
In the current stock market context, PVH’s forward price/earnings multiple stands at 11.35, remaining lower than its competitors Ralph Lauren and Lululemon, with 16.28 and 26.27, respectively.
As an indication, Ralph Lauren’s shares also experienced a 3.7% decline before trading, perhaps reflecting a broader trend in the luxury fashion industry.
In conclusion, PVH Corp’s current turmoil raises questions about the resilience strategies of major fashion brands in an unpredictable global economic environment that often reacts sharply to the slightest news.
Source: Reuters
Image credit: PVH Corp.
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How does PVH Corp plan to respond to the current decrease in demand and the drop in its shares?
PVH Corp plans to strengthen the quality of its sales and focus on consolidating its market-leading position, especially in Europe, where it generates nearly half of its revenue. The company hopes that these actions, combined with better inventory planning and optimized operations management, will help stabilize its margins and meet long-term investor expectations.
