Press release·03/03/2025 19:35:00

Overview of the Company’s Financial Performance

PVH Corp. is one of the largest global apparel companies, with a history going back over 140 years and iconic lifestyle brands like TOMMY HILFIGER and Calvin Klein that together generate over 90% of its revenue. The company reported revenue of $9.2 billion in 2023, with over 70% generated outside the United States.

In 2022, PVH introduced the PVH+ Plan, a multi-year strategic initiative to build Calvin Klein and TOMMY HILFIGER into the most desirable lifestyle brands and make PVH one of the highest performing brand groups in the sector. The company’s results in 2023 and the first nine months of 2024 were impacted by several factors:

• An investigation by China’s Ministry of Commerce under the Unreliable Entities List Provisions, which could result in penalties and disruption to PVH’s operations in China, a market that generated 6% of revenue and 16% of income in 2023.

• Inflationary pressures that negatively impacted revenue and earnings in 2023, including increased product and labor costs, as well as a slowdown in consumer demand. These pressures have continued into 2024 but to a lesser extent.

• Disruptions to global supply chains due to the Israel-Hamas war, attacks on shipping in the Red Sea, and the brief port strike on the U.S. East and Gulf Coasts, which resulted in shipment delays and increased freight costs.

• Uncertainty in the macroeconomic environment, with PVH’s 2024 outlook assuming no material worsening of current conditions.

Revenue and Profit Trends

In the third quarter of 2024, PVH’s total revenue decreased 5% to $2.255 billion, primarily due to:

• A 2% decline related to the divestiture of the Heritage Brands intimates business.
• A 1% positive impact from foreign currency translation.
• A 1% decrease in the Tommy Hilfiger segment, with a 3% decline in North America offset by flat performance in the International segment.
• A 3% decrease in the Calvin Klein segment, with a 9% decline in North America partially offset by a 1% increase in the International segment.
• A 54% decrease in the Heritage Brands Wholesale segment, largely due to the intimates business divestiture.

Gross profit in the third quarter of 2024 was $1.317 billion, or 58.4% of revenue, compared to $1.339 billion, or 56.7% of revenue, in the prior year period. The 170 basis point increase was driven by lower product costs, a shift in revenue mix towards the higher-margin direct-to-consumer channel, and the impact of the Heritage Brands intimates divestiture.

SG&A expenses in the third quarter of 2024 were $1.154 billion, or 51.2% of revenue, compared to $1.124 billion, or 47.6% of revenue, in the prior year. The 360 basis point increase was primarily due to costs related to the amendment of the Tommy Hilfiger employment agreement, the impact of the revenue mix shift, and costs associated with the Growth Driver 5 Actions initiative, partially offset by savings from the 2022 cost savings program.

For the first nine months of 2024, revenue decreased 7% to $6.281 billion, with the Heritage Brands intimates divestiture accounting for a 3% decline. Gross margin improved 250 basis points to 59.9%, while SG&A expenses as a percentage of revenue increased 240 basis points to 51.8%.

PVH expects revenue for the full year 2024 to decrease approximately 6-7%, with the Heritage Brands intimates divestiture accounting for a 2% decline and the impact of the 53rd week in 2023 contributing a 1% decline. Gross margin is expected to increase by around 120 basis points, while SG&A expenses as a percentage of revenue are expected to increase by approximately 170 basis points.

Strengths and Weaknesses

Strengths:

• Iconic global lifestyle brands in TOMMY HILFIGER and Calvin Klein that generate over 90% of revenue
• Diversified global operations, with over 70% of revenue generated outside the U.S.
• Improving gross margins through favorable product cost trends and revenue mix shift to higher-margin direct-to-consumer channel
• Disciplined approach to managing expenses, including the 2022 cost savings initiative and the Growth Driver 5 Actions

Weaknesses:

• Exposure to macroeconomic and geopolitical risks, including the investigation by China’s Ministry of Commerce and supply chain disruptions
• Declining revenue in certain segments, particularly the Heritage Brands Wholesale business
• Increasing SG&A expenses as a percentage of revenue, driven by the revenue mix shift and strategic investments

Outlook and Future Prospects

PVH’s outlook for the remainder of 2024 and the full year is subject to significant uncertainty due to the macroeconomic and geopolitical factors mentioned earlier. The company expects revenue for the fourth quarter of 2024 to decrease approximately 6-7%, with a 2% negative impact from foreign currency translation and a 3% decline related to the 53rd week in 2023. For the full year 2024, revenue is expected to decrease approximately 6-7%, with the Heritage Brands intimates divestiture accounting for a 2% decline and the 53rd week in 2023 contributing a 1% decline.

Gross margin for the fourth quarter of 2024 is expected to decrease by around 200 basis points compared to the prior year period, primarily due to the timing of lower-margin wholesale sales, increased promotional activity, and higher freight costs. However, for the full year 2024, gross margin is expected to increase by approximately 120 basis points.

SG&A expenses as a percentage of revenue are expected to be relatively flat in the fourth quarter of 2024 compared to the prior year period, but increase by approximately 170 basis points for the full year 2024. This increase is primarily due to the impact of the revenue mix shift, the deleveraging of expenses from the revenue decline, and costs associated with the Mr. Hilfiger amendment and the Growth Driver 5 Actions initiative.

PVH’s liquidity and capital resources remain strong, with $560 million in cash and cash equivalents and $1.4 billion in available borrowing capacity as of November 3, 2024. The company expects to make long-term debt repayments of approximately $12 million in 2024 and repurchase approximately $400 million of common stock.

Overall, PVH’s financial performance in 2023 and the first nine months of 2024 was impacted by various macroeconomic and geopolitical factors, as well as strategic initiatives and divestitures. While the company faces ongoing uncertainty, its iconic brands, global diversification, and disciplined approach to managing expenses and capital allocation position it to navigate the challenges and capitalize on opportunities in the years ahead.