PVH stock price punched in the face after earnings: sell the rip?

By:
on Apr 2, 2024
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  • PVH Corp's share price tumbled by more than 23% in the pre-market session.
  • The company warned that its European business was facing major headwinds.
  • It also launched a big $2 billion share buyback plan.

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PVH (NYSE: PVH) stock price tumbled hard on Tuesday after the company issued a major warning on its European business. It crashed by over 23% in the pre-market session, erasing all gains it made in the first quarter. It has retreated to its lowest level since December 8 last year.

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Weak guidance

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PVH is one of the biggest luxury goods companies in the United States. It owns some of the best-known brands in the industry like Calvin Klein and Tommy Hilfiger. It has a market cap of over $8 billion and competes with the likes of Tapestry and V.F Corporation.

PVH Corp published strong financial results on Monday. Its revenue rose slightly to $2.49 billion, leading to an annual figure of $9.21 billion. Its earnings per share rose to $4.55 in the fourth quarter.

However, the company published a weak financial guidance for this year. It expects that its total sales will drop by between 6% and 7% because of the recent sale of Heritage Brands. Its operating margin is expected to remain flat during the year.

PVH Corp also warned that its European business was facing substantial headwinds as the economy went through sustained weakness. In the statement, the company said:

“In Europe where the macro has become more challenged, our focus is on quality of sales to further strengthen our market-leading position.”

The ongoing collapse of PVH stock erases most gains that the company has made in the past few years. Before the plunge, the stock was up by more than 225% from its lowest level in September 2022 and its highest level this year.

The biggest concern for PVH is that its brands are ageing and are therefore showing low revenue growth. For example, in North America, Tommy Hilfiger’s and Calvin Klein’s business dropped by 2% in the fourth quarter. 

Therefore, there are questions about whether PVH Corp should continue as a standalone business or if it should be acquired. Last year, Tapestry, the parent company of Coach and Kate Spade acquired Capri Holdings, the owner of Versace and Jimmy Choo.

PVH stock price forecast

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PVH stock

PVH chart by TradingView

The PVH share price crashed hard even after the company launched a $2 billion share buyback. That is a good initiative for a company that has been reducing its share count for years. It ended last year with 59.9 million in outstanding shares, down from over 75 million a few years ago. 

The PVH stock has now dived below the crucial support level at $124.78, its highest swing in November 2021. It has dropped to the 50-week moving average.

Therefore, the outlook for the stock is relatively bearish, with the next point to watch being the next psychological level at $100. This slide will likely continue as more Wall Street analysts slash their estimates.

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