PVH Corp (PVH), the apparel company that owns the brands Calvin Klein and Tommy Hilfiger along with three women’s undergarments brands, had a wonderful year last year with revenue of $9.15 billion and net income of $952 million. This was the best bottom line performance at the company in well over a decade. The stock unfortunately has not benefited from this performance, down more than 23% over the last year. In fact, it has been a lost decade for the stock as it is down 10% over the last ten years. The company was trading between 8 and 10 times EBITDA pre-pandemic and now trades at 6.2 times expected fiscal 2023 EBITDA (the company’s fiscal year ends in January 2023).
The company has been buying back stock and retired more than 8% of its shares outstanding during the last four years. However this pales in comparison with its latest stock buyback announcement last week where PVH decided to buyback up to $1 billion of its stock or nearly 18% of the shares outstanding. This move in interesting considering they have $2.72 billion in net debt on the balance sheet or $1.5 billion of net debt after you remove capital leases. The company generates more than 40% of its revenue by selling direct to consumers and hence the capital leases. More than 60% of the company’s revenue comes from outside the United States.