Retail has become a dumpster fire of growing proportions. We can add a multitude of names to the pile Thursday with PVH Corp. (PVH) leading the way. The purveyor of brands names that include Tommy Hilfiger, Calvin Klein, and Heritage, managed to deliver Q1 results slightly ahead of Wall Street estimates after the close on Wednesday. Unfortunately, the company guided lower for the full year 2019 and disclosed expectations of an ugly Q2.
Management anticipates the full year earnings to land between $10.20 and $10.30 versus previous expectations of $10.43. A ten-cent chunk of this can be explained by forex. PVH expects foreign currency to drag earnings by $0.32 per share versus previous expectations of $0.22. That actually doesn't make the full year number look too bad. Slightly disappointing, but nothing compared to Q2 guidance where PVH projects earnings per share of $1.85 to $1.90 against previous expectations of $2.43.
No amount of buybacks is going to help Q2 even as management has the ability to repurchase another $900 million under the current program. In Q1, PHV repurchased 500,000 for $61 million. At an average of $122 per share, the company is down a cool $17.25 million on that repurchase in only a few months.
PVH isn't the only retailer hit hard today. Tilly's (TLYS) is down 11% after a disappointing report for which it blamed weather. At least PVH can point to tariffs as an issue, which is well-known, but weather is always the lazy excuse in my view given how much can be done online these days. At least both of these are better than the 50%+ haircut in J. Jill (JILL) shares on Thursday. The company missed, guided next quarter from a gain to a loss and cut full year estimates from $0.69 to $0.19.
The fact we're seeing strength in Walmart (WMT) , Target (TGT) , Dollar Tree (DLTR) , and Dollar General (DG) points to the consumer as cost conscience and practical right now. It might be why PHV talked about macro concerns and softness in BOTH the U.S. and China.
From a technical perspective, PVH bulls would be best served with a close over $88 this week. Anything between $86-$88 will be tenuous support at best. Shares have given up more than 35% over the past five weeks, so we are hitting oversold areas. While Q2 is expected to be ugly, management appears cautiously optimistic for the second half of the year. Furthermore, any resolution to the tariff situation will likely propel PVH shares higher in quick fashion. I'll admit I'm getting interested here and would certainly dip my toe between $75 and $80 a share. For now, I'll see how we close the week before acting.