Analyst Note| David Swartz |
Despite poor sales in North America, no-moat PVH beat our revenue and earnings expectations for 2020’s third quarter on 6% growth in China, solid sales in Europe, and 36% digital growth. Total revenue dropped 18%, but this was better than our forecast of a 23% decline. The pandemic continues to impact PVH in Europe and, especially, North America, where many retail stores have suffered from the 95% drop in international tourism (normally about 35%-40% of the region’s sales). While PVH’s shares jumped about 9% on the report, we continue to view it as undervalued. We think Calvin Klein and Tommy Hilfiger have growing international appeal and do not believe PVH is in any danger of falling into financial distress, having closed the quarter with $2.7 billion in liquidity. We expect to increase our per share fair value estimate of $108 by a mid-single-digit percentage.