Buyback Wednesdays- PVH Announces A $1 Billion Buyback

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.

Considering their aging brands and online presence (digital sales represented only about 25% of total sales), I would much rather the company use its capital to expand its omni-channel presence or acquire brands that appeal to younger customers. However PVH is not unique in its desire to buyback stock and we saw G-III Apparel Group (GIII) announce a 10 million share buyback representing nearly 16% of their market cap at announcement last month. G-III licenses both Calvin Klein and Tommy Hilfiger from PVH and also owns brands like DKNY, G. H. Bass, Jessica Howard, Wilson’s Leather, etc.

The other interesting repurchase announcement from last week include a $2.8 billion buyback by Synchrony Financial (SYF), which was spun out of General Electric (GE) in November 2015.  Synchrony was already a cannibal before this announcement, having retired nearly 29% of its shares outstanding during the last four years.

Welcome to edition 3 of Buyback Wednesdays, a new weekly series of articles we launched on Inside Arbitrage a couple of weeks back to track the top stock buyback announcements during the prior week. We have been tweeting about buybacks for several months and decided to start writing about them in a weekly article to provide more context.

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