PVH Earnings: Profitability Shines Despite Difficult Sales Environment; Shares Very Undervalued

PVH’s third-quarter profitability exceeded our expectations even as 3.6% revenue growth was short of our 5.5% estimate due to weather and economic conditions. While the near-term sales outlook is soft, we think PVH is making good progress on its PVH+ plans, including product enhancements, stronger digital sales, cost-cuts, pricing, and inventory management (down 19% at quarter’s end), and that these efforts are improving margins. Thus, we expect to lift our $141 fair value estimate by a low-single-digit percentage. Although we rate PVH as a no-moat firm, we believe it has strengths, including the international appeal of its brands, and that its shares are very attractive.