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PVH Corp. (PVH +15%) is surging today after reporting Q4 (Jan) results last night. This fashion apparel company (Calvin Klein, Tommy Hilfiger) beat on EPS, but PVH broke its string of nine consecutive double-digit beats. Revenue fell 4.8% yr/yr to $2.37 bln, which was slight upside. We think the stock is being propelled bullish guidance, which was a surprise given the struggles we have seen from other fashion brands as consumers pull back on spend.

• Another catalyst was PVH saying it intends to enter into accelerated share repurchase (ASR) agreements to repurchase $500 mln in shares in 2025. The agreements are under the existing $5 bln repurchase authorization, of which $1.8 bln remains available. This ASR equates to roughly 14% of shares outstanding, which is a huge amount. The stock has been under pressure in recent months, but clearly management sees some value down here.
• Turning to the Q4 results, PVH said it delivered a strong holiday performance that beat expectations on a constant currency (-2% CC) basis, with growth in both its D2C and wholesale channels. PVH said it improved the relevance of sell through of its Fall 2024 product assortment across both brands. It also significantly increased profitability in North America.
• Starting with Calvin Klein, PVH started 2024 with what it describes as an "explosive" spring campaign featuring Jeremy Allen White driving record visibility and engagement, which CK continued to build on through the year. In Q4, CK featured Kendall Jenner, Idris Elba, Mingyu, among others. PVH elevated the brand in the marketplace, including the opening of a flagship store in Paris. Tommy Hilfiger also had a very strong brand building year, leaning into its classic American cool DNA.
• Despite good results in Q4, PVH concedes it's navigating global macro volatility, particularly in North America. Following a strong holiday, retail traffic trends in Jan-Feb took a step down, a dynamic affecting the entire sector. Also, PVH is seeing a post New Year slowdown in China that led to a step down in revenue. The trend has since stabilized at these new lower levels.
• Quickly turning to the guidance, the Q1 (Apr) guidance was generally in-line, but the full year adjusted EPS guidance EPS of $12.40-12.75 was pretty eye-popping. It was well above analyst expectations and that is despite an expected $0.20 FX impact. Revenue is expected to be flat or increase slightly and EBIT margins should be flat to up slightly with a stronger second half. PVH cites disciplined execution, strong European Order books, as well as structural cost efficiencies. The ASR will also reduce share count pretty aggressively, which helps the EPS number.

It has been a mixed earnings bag within the fashion apparel space in recent weeks. CPRI sold off on earnings, but TPR and RL did well. Also, OXM, which caters to higher income consumers, had a bad quarter last week. As such, we think investors were bracing for weak guidance given the pullback in consumer spend and with tariffs looming. Investors were pretty shocked to see PVH provide such bullish EPS guidance. It meant, at the mid-point, that the stock was trading at a P/E of just 5.1x, so investors have snapped up shares today.