On Wednesday, Evercore ISI adjusted its outlook on shares of PVH Corp (NYSE:PVH), reducing the price target to $125.00 from the previous $145.00, while maintaining an Outperform rating on the stock.
The revision followed a mixed second-quarter update for the fiscal year 2024, in which revenues reached the higher end of the company's guidance despite a challenging macroeconomic environment in the United States and China.
PVH Corp's earnings per share (EPS) beat expectations mainly due to a tax benefit that contributed $0.55 of the $0.72 beat versus consensus. However, the company's earnings before interest and taxes (EBIT) margins were slightly better than anticipated, coming in at 9.1% compared to the Street's expectation of 8.9%.
Despite these positive notes, the guidance for second-half EPS was lowered by approximately $0.20, largely due to a more conservative outlook for the third quarter as trends slowed in the latter part of the second quarter in the U.S. and China.
The analyst noted that direct-to-consumer (DTC) sales in North America and Asia, particularly China, decelerated mid-second quarter. Consequently, PVH Corp has slightly lowered its operating assumptions for the second half of the year.
Although the company is expected to realize more cost savings than initially planned in the fourth quarter, the third-quarter guidance is below Street expectations, with an EPS guide of $2.50 versus the Street's projection of $3.12.
The report also highlighted that European trends are in line with the company's plans from approximately 90 days ago, with Europe's DTC trends only slightly below the company's total second-quarter performance, excluding foreign exchange impacts.
However, the expectations for North American and Chinese operations for the second half are somewhat reduced, and DTC performance is anticipated to be slightly worse compared to the guidance issued 90 days earlier.
Consequently, the previous guidance for a gross margin (GM) increase of approximately 200 basis points year-over-year for 2024 is expected to be revised downward, albeit slightly.
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