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Tommy Hilfiger-owner PVH shares fall as tepid Europe demand hits 2024 forecasts

Published 04/02/2024, 07:27 AM
Updated 04/02/2024, 10:31 AM
© Reuters. Boards with Tommy Hilfiger store logo are seen on a shopping center at the outlet village Belaya Dacha outside Moscow, Russia, April 23, 2016.  REUTERS/Grigory Dukor/File Photo

By Savyata Mishra

(Reuters) -Shares of PVH Corp (NYSE:PVH) slumped up to 25% on Tuesday, a day after the Calvin Klein-owner forecast a steeper-than-expected drop in its annual revenue on the back of weakening demand in Europe.

The apparel maker, which also owns Tommy Hilfiger, forecast fiscal 2024 revenue to fall between 6% and 7%, steeper than the 2.3% drop estimated by analysts, according to LSEG data.

PVH plans to significantly reduce the number of online platforms it sells to in Europe in mid-2024, CEO Stefan Larsson said on a conference call on Tuesday, adding that the move would lead to a 5% reduction in its total European sales this year.

"Where the consumer and macro (backdrop) are tougher, we are willing to sacrifice short term, low-quality revenues in order to strengthen our brand position and pricing power," Larsson said.

The decline in PVH stock also dragged shares of peers VF Corp (NYSE:VFC), Tapestry (NYSE:TPR) and Ralph Lauren (NYSE:RL), all of which were down at least 5%.

"A slowing and increasingly promotional European market is a concern and the outlook comes as a surprise," Telsey Advisory Group analyst Dana Telsey wrote in a note.

PVH forecast its annual earnings per share in the range of $10.75 to $11.00, versus analysts' estimate of $11.89.

Retailers such as PVH, Levi Strauss (NYSE:LEVI) and Ralph Lauren have struggled with weaker wholesale business in North America due to department stores and retailers cutting back on orders owing to slow consumer demand.

PVH's wholesale revenue declined 10% in the fourth quarter, as wholesale customers across North America and Europe continued to take a cautious approach.

© Reuters. Boards with Tommy Hilfiger store logo are seen on a shopping center at the outlet village Belaya Dacha outside Moscow, Russia, April 23, 2016.  REUTERS/Grigory Dukor/File Photo

The company, however, beat analysts' expectations for quarterly sales and profit on the back on a strong holiday demand and better inventory planning.

PVH's forward price-to-earnings multiple, a common benchmark for valuing stocks, is at 11.35, lower than Ralph Lauren and Lululemon Athletica (NASDAQ:LULU)'s P/E ratio of 16.28 and 26.27, respectively.

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