No-Moat PVH Overcomes External Issues to Post Solid Q1; Shares Deeply Undervalued

PVH managed multiple challenges—including product shortages due to shipping delays, the war in Ukraine, a stronger U.S. dollar, and China lockdowns—to post first-quarter results above our expectations. The firm recorded 2% sales growth (7% constant currency) versus our forecast of flat and an operating margin of 9.9%, 140 basis points better than our projection. Although the external pressures have continued into the second quarter, the firm’s guidance for $9.00 in adjusted earnings per share for the year basically matches our forecast. Thus, we do not expect to make any material change to our $129 fair value estimate. We view the shares as materially undervalued.