PVH Vexed by Currency and Other External Issues but Progress Continues; Shares Very Undervalued

Affected by the strong U.S. dollar, economic weakness in some areas, and supply issues, no-moat PVH reduced its guidance. The company now expects 2022 adjusted EPS of about $8, below its prior outlook of approximately $9 and our $9.19 estimate. While currency issues are affecting all multinational apparel firms, PVH’s exposure is extreme as Europe is its most important market (48% of 2021 sales). Apart from external factors, however, we believe the company continues to make progress on the PVH+ plan that was unveiled at an analyst event in April. Thus, despite the dimmed near-term outlook, we think it remains on track for profitability improvement and do not expect to make any material change to our $131 fair value estimate. We continue to view PVH, trading at a single-digit P/E on depressed earnings, as attractive. We think investors are overly concerned about market turmoil and short-term problems and are overlooking the impact that investments in its two global brands, Tommy Hilfiger and Calvin Klein, should have on its sales and margins.