PVH Corp. — Form 10-K Summary
Reporting period: The filing covers fiscal 2021, the 52 weeks ended January 30, 2022, with comparisons to fiscal 2020 and 2019. Although the request refers to “2020 Q4,” this is an annual report for fiscal 2021. PVH operates globally, with Tommy Hilfiger and Calvin Klein contributing over 90% of 2021 revenue.
Key financial metrics
| Metric | FY2021 | FY2020 | FY2019 |
|---|---|---|---|
| Total revenue | $9.155 billion | $7.133 billion | $9.909 billion |
| Gross profit / margin | $5.324 billion / 58.2% | $3.777 billion / 53.0% | $5.388 billion / 54.4% |
| SG&A / % of revenue | $4.454 billion / 48.7% | $3.983 billion / 55.8% | $4.715 billion / 47.6% |
| Income (loss) before interest and taxes | $1.077 billion | $(1.072) billion | $559 million |
| Net income (loss) attributable to PVH | $952 million | $(1.136) billion | $417 million |
| Diluted EPS | $13.25 | $(15.96) | $5.60 |
| Cash provided by operations | $1.071 billion | $698 million | $1.020 billion |
| Capital expenditures | $268 million | $227 million | $345 million |
FY2021 operating cash flow less capital expenditures was approximately $803 million, calculated from the reported amounts. Cash and equivalents were $1.243 billion at year-end, down from $1.651 billion. Long-term debt carrying value was $2.318 billion, with $10.8 million of short-term borrowings; the filing reports $2.368 billion of aggregate debt principal. PVH also reported approximately $1.5 billion of available borrowing capacity. About 80% of long-term debt carried fixed interest rates.
Material changes versus comparable periods
- Revenue rose 28% from FY2020, reflecting recovery from pandemic-related closures and weaker demand, but remained about 8% below FY2019. Tommy Hilfiger revenue increased 29% and Calvin Klein revenue increased 39% year over year; Heritage Brands revenue declined 8%, partly reflecting divestitures and store exits.
- Gross margin improved 520 basis points from FY2020, mainly from more full-price selling, international revenue mix and favorable currency effects. Higher freight costs partly offset these gains. SG&A increased in dollars but fell as a share of revenue, primarily through revenue leverage and cost savings.
- FY2020 included $933.5 million of goodwill and intangible-asset impairment charges and $81.9 million of other long-lived-asset impairment charges. Total impairment charges, including an equity-investment impairment, were approximately $1.028 billion. No goodwill or intangible-asset impairment was recorded in FY2021.
- Operating cash flow increased year over year. PVH repaid $1.030 billion of long-term debt voluntarily during FY2021, repurchased approximately $350 million of shares under its program, and received $216 million net proceeds from the Heritage Brands transaction.
Outlook, commentary and risks
- Management expected FY2022 revenue growth of approximately 2%–3% versus FY2021, including an estimated 4% negative currency impact. The outlook also reflected about 2% lower revenue from the Heritage Brands transaction and retail exit, and about 2% from the Russia, Belarus and Ukraine disruption. Management cautioned that the outlook could change materially.
- Management expected gross margin to be relatively flat and SG&A as a percentage of revenue to be relatively flat in FY2022. It anticipated higher labor, raw-material and freight costs, with planned price increases intended to offset some pressure. Digital channels were expected to remain about 25% of revenue, with double-digit digital growth anticipated.
- Following Russia’s invasion of Ukraine, PVH temporarily closed stores and paused commercial activity in Russia and Belarus from March 7, 2022; shipments to Ukrainian wholesale customers were reduced and orders canceled. The company estimated the region represented about 2% of FY2021 revenue and expected a negative FY2022 impact of approximately $175 million on revenue and $50 million on net income.
- COVID-19-related store disruptions, supply-chain delays, elevated in-transit inventory and higher logistics costs remained risks. Other material risks include inflation, foreign-exchange movements, tariffs and sourcing restrictions, dependence on wholesale customers and licensees, consumer demand and brand relevance, and potential impairment of goodwill and intangibles.
- PVH completed the sale of selected Heritage Brands trademarks and related assets in August 2021 for $216 million net proceeds, recording an aggregate pretax gain of about $113 million. It also completed its exit from Heritage Brands Retail during 2021. The divestiture and exits affect period-to-period comparability.
- Year-end goodwill and other intangible assets totaled approximately $6.136 billion, or 49% of total assets. Management reported no impairment in FY2021, but future deterioration in business conditions, forecasts or valuation assumptions could result in charges.
Important facts for investors to verify
- Whether FY2022 revenue, margin and digital-channel expectations were achieved, particularly after currency effects and the Ukraine-related disruption.
- Whether freight, labor and raw-material inflation was offset by price increases without weakening demand or increasing discounting.
- Whether inventory availability, in-transit inventory and wholesale shipments normalized, and whether working capital continued to support operating cash flow.
- Debt repayment and refinancing requirements, covenant compliance, and the company’s capacity to fund planned capital spending and shareholder returns.
- Key assumptions supporting the carrying values of goodwill and intangible assets, which represent a substantial portion of total assets.
- The sustainability of FY2021 earnings in light of the $113 million divestiture-related gain and unusually low 2.1% effective tax rate; management forecast a 29%–30% tax rate for FY2022.
The filing reports unqualified audit opinions on the consolidated financial statements and internal control over financial reporting.