Wall Street is still waiting for PVH Corp. to take off.
Shares of the company fell 10.5 percent to $78.37 in midday trading Thursday, after the company beat its third-quarter earnings estimates, but didn’t raise its outlook for the year, signaling that business will be spread out between the two quarters.
“PVH shares look cheap, but they sure aren’t making it easy for value investors to step in,” said Tom Nikic, an analyst at Needham. “Trends continue to be very volatile.”
The Calvin Klein and Tommy Hilfiger parent company saw third-quarter revenues increase 2 percent to $2.3 billion, making for a drop of less than 1 percent in constant currencies. PVH expects revenues to be flat to slightly positive for the year, in constant currencies.
Nikic zeroed in on the company’s “negative inflection” in the Europe, Middle East and Africa division, which trended down 2 percent in constant currencies.
“This was expected to be one of the growth drivers of the business following last year’s reset of the market — a gross margin miss didn’t help either,” the analyst said. “We continue to believe that shares are too cheap, particularly since they can probably buy back a high-single-digit percent of the float annually at these levels, if not more.
“Third-quarter gross margin was down 200 basis points, missing guidance by 25 basis points, driven by tariffs (110 basis point negative impact), the impact of bringing licenses in-house (50 basis points) and higher promotional mix, partially due to the … Calvin Klein product shipment delays,” he said.
PVH has been busy taking back licenses for its North American wholesale business from G-III Apparel Group, absorbing some of the businesses and finding other licensees for some categories, including dresses.
In conjunction with that take-back, the company set up a “global product kitchen” for Calvin Klein in New York, a complicated switch that had an uneven start.
Stefan Larsson, chief executive officer, told analysts on a conference call Thursday that the “delays from the transitory Calvin global product challenges put extra strain on our European distribution center, impacting shipments for both Calvin and Tommy, which made us lose a few critical weeks of full-price selling.”
But Larsson, who’s been busy remaking the company since stepping into the corner office in 2021, suggested it was growing pains the company was feeling.
“We are on track both from on-time delivery coming into spring ’26 and the margin recapture that we set out to take back. On both fronts, we are on track, which is really good,” he said. “It’s painful now, but we had to do it because in order to build premium products, differentiated product franchises with innovation, we need the global capability to do that. And now we have it for both Calvin and Tommy. And so do all of our best competitors in the premium space also have it. But we had to build that. And now you start to see it.”
But Wall Street is still waiting.
Matthew Boss, an analyst at J.P. Morgan, said: “While we see multiyear brand ‘unlock’ underway with the new leadership team focused on driving increased desirability of the Calvin Klein and Tommy Hilfiger brands through improved product design and marketing, we see an elongated path to reaching management’s mid-teens operating margin target given a slower top-line recovery with continued macroeconomic challenges globally, in addition to a competitive external promotional backdrop, and foreign exchange pressures.”
This year, PVH expects its adjusted operating margin to come in at about 8.5 percent.
