Stock Story -
Fashion conglomerate PVH (NYSE:PVH) announced better-than-expected revenue in Q3 CY2024, but sales fell by 4.6% year on year to $2.26 billion. Its non-GAAP profit of $3.03 per share was 17% above analysts’ consensus estimates.
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PVH (PVH) Q3 CY2024 Highlights:
- Revenue: $2.26 billion vs analyst estimates of $2.22 billion (4.6% year-on-year decline, 1.5% beat)
- Adjusted EPS: $3.03 vs analyst estimates of $2.59 (17% beat)
- Management reiterated its full-year Adjusted EPS guidance of $11.63 at the midpoint
- Operating Margin: 8.1%, down from 9.7% in the same quarter last year
- Constant Currency Revenue fell 5.9% year on year (0.7% in the same quarter last year)
- Market Capitalization: $6.23 billion
Company OverviewFounded in 1881 by a husband and wife duo, PVH (NYSE:PVH) is a global fashion conglomerate with iconic brands like Calvin Klein and Tommy Hilfiger.
Apparel and Accessories
Thanks to social media and the internet, not only are styles changing more frequently today than in decades past but also consumers are shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel and accessories companies have made concerted efforts to adapt while those who are slower to move may fall behind.Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. PVH’s demand was weak over the last five years as its sales fell at a 2.2% annual rate. This was below our standards and is a sign of poor business quality.We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. PVH’s annualized revenue declines of 1.1% over the last two years suggest its demand continued shrinking.
PVH also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales were flat. Because this number aligns with its normal revenue growth, we can see PVH’s foreign exchange rates have been steady.
This quarter, PVH’s revenue fell by 4.6% year on year to $2.26 billion but beat Wall Street’s estimates by 1.5%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. This projection is underwhelming and implies its newer products and services will not lead to better top-line performance yet.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.PVH has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 7%, subpar for a consumer discretionary business.