Release Date: December 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PVH Corp (PVH, Financial) exceeded both top and bottom line guidance for the third quarter, driven by strong execution of the PVH+ Plan.
- The company reported significant gross margin expansion, up 170 basis points year-over-year.
- PVH Corp (PVH) is seeing double-digit sell-through improvements for fall 2024 products across both brands and all regions.
- The company is reaffirming its full-year revenue and non-GAAP EBIT margin guidance, indicating confidence in its financial outlook.
- PVH Corp (PVH) is making strategic investments, such as opening a new Calvin Klein flagship store in New York's SoHo, to enhance brand presence.
Negative Points
- Direct-to-consumer revenue was flat on a reported basis and down 1% in constant currency, indicating challenges in this segment.
- Wholesale revenue declined 4% on a reported basis and 5% in constant currency, partly due to proactive quality of sales actions.
- The company is facing a more promotional environment in the U.S. and China, impacting gross margins.
- PVH Corp (PVH) is dealing with supply chain disruptions and increased freight costs, which are expected to impact fourth-quarter gross margins.
- The ongoing investigation by China's Ministry of Commerce presents uncertainty, although PVH Corp (PVH) is cooperating fully.
Q & A Highlights
Q: Could you elaborate on customer demand for fall product assortments and the impact on global DTC and wholesale orders?
A: Stefan Larsson, CEO, explained that the fall '24 product season showed double-digit sell-through improvements across both brands and all regions. Direct-to-consumer (DTC) trends improved significantly, with September and October showing growth. In Europe, wholesale sell-throughs also increased, setting a positive outlook for fall '25 orders.
Q: Can you provide more details on the fourth quarter gross margin guidance, which is expected to decline by 200 basis points?
A: Zachary Coughlin, CFO, noted that the decline is due to a more promotional holiday season in the U.S., modest freight cost increases, and the timing effect of North America wholesale shipments. These factors are largely transitory, and the company expects to retain the gross margin improvements achieved over the past years.
Q: How is the transition of bringing women's product in-house in North America progressing?
A: Stefan Larsson, CEO, stated that bringing back control of women's product assortment is crucial for long-term competitiveness. The transition is on plan and is a multiyear process aimed at improving product execution and driving long-term brand growth.
Q: Can you discuss the impact of inventory management on the fourth quarter and the strategy behind maintaining essential products in stock?
A: Stefan Larsson, CEO, highlighted that the company has better inventory composition with more new and less old stock. The focus is on keeping iconic products like Oxford shirts and underwear in stock 95% of the time to optimize profitable sell-through.
Q: What progress has been made in North America, and how do you view the promotional activity in the region?
A: Stefan Larsson, CEO, reported significant improvements in North America, with consistent double-digit EBIT growth despite a tough macro environment. The holiday season started earlier, increasing promotional pressure, but the company maintains a strong inventory position with more fresh stock.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
