PVH Earnings: Nice Start to 2023 Dimmed by Near-Term Outlook; Shares Very Undervalued

PVH’s sales and earnings eclipsed our expectations in its 2023 first quarter. However, this result was somewhat overshadowed by disappointing second-quarter guidance, sending shares down 10%. Still, as the firm affirmed its full-year outlook for 3%-4% sales growth, a 10% operating margin, and $10 in EPS, and our estimates are close to these marks, we do not expect to make any material change to our $141 per share fair value estimate and view shares as very attractive. Although we see PVH as a no-moat company due to the competitiveness of its industry, we believe its two main brands, Tommy Hilfiger (52% of the quarter’s sales) and Calvin Klein (41% of sales), are among the few brands with global appeal and believe that the PVH+ plan (product enhancements, stronger e-commerce, inventory management, and cost cuts) will lift operating margins to 12% from the current 10% by 2025.