PVH’s Strong Q4 Results and 2023 Outlook Provide Confidence in PVH+ Plan; Shares Very Attractive

Shaking off macroeconomic and industry concerns, PVH’s sales and earnings in 2022’s fourth quarter exceeded our forecast. Moreover, its 2023 guidance for 3%-4% sales growth, a 10% operating margin, and about $10 in EPS compares favorably with our prior estimates of 2%, 9%, and $8.90, respectively. PVH’s shares soared roughly 20% on the report, but we still view them as very undervalued relative to our $136 fair value estimate, which we expect to lift by a mid-single-digit percentage. Although we classify it as a no-moat firm, we also believe that its key brands have international appeal and that its PVH+ plan (focused on product enhancements, stronger e-commerce, inventory management, and cost cuts) is sound.