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No-Moat PVH’s International Operations Led to Q3 Outperformance Despite COVID-19; Shares Attractive

David Swartz Equity Analyst

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.

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Company Profile

Business Description

PVH designs and markets branded apparel in more than 40 countries. Its key fashion categories include men’s dress shirts, ties, sportswear, underwear, and jeans. PVH’s leading designer brands, Calvin Klein and Tommy Hilfiger, generate about 85% of its revenue. PVH also owns several smaller brands, including Izod, Van Heusen, and Arrow, and licenses brands from third parties. PVH distributes its clothing wholesale to retailers and through company-owned stores. The company traces its history to 1881 and is based in New York City.

200 Madison Avenue
New York, NY, 10016
T +1 212 381-3500
Sector Consumer Cyclical
Industry Apparel Manufacturing
Most Recent Earnings Oct 31, 2020
Fiscal Year End Feb 2, 2021
Stock Type Cyclical
Employees 40,000