Tommy Hilfiger And Calvin Klein Parent's Improving Trends To Continue Despite Wholesale Weakness, Says Analyst

Telsey Advisory Group analyst Dana Telsey reiterated an Outperform rating on the shares of PVH Corp PVH with a price target of $102.

PVH will report second quarter results on Tuesday, August 29, after the market close.

The analyst pointed out that in the last quarter, PVH maintained its annual outlook and still expects revenues to grow 3%-4% for the year.

Below the topline, gross margin is expected to increase over 100 basis points Y/Y, net of 100 basis points of headwinds from higher product costs, as a result of favorable channel and regional mix shifts from increasing DTC and international penetration, said the analyst.

The operating margin outlook was also maintained at ~10%, up from 9.5% last year, with the FY23 EPS outlook unchanged at ~$10.00.

By geography, Europe and North America are both expected to increase low-single-digit Y/Y driven by strength in DTC, with wholesale caution tempering growth, added the analyst.

Elsewhere, Asia Pacific is expected to grow low-double-digit Y/Y as COVID restrictions in China have eased, leading to a meaningful pickup in demand for both Tommy Hilfiger and Calvin Klein.

Overall, PVH reported a solid start to FY23 last quarter, and the analyst expects the momentum to continue across Tommy Hilfiger and Calvin Klein, with sales continuing to recover to pre-pandemic levels, as well as continued profitability improvements.

With increased confidence in the plan, management is making strategic investments in growth in areas such as marketing, while continuing to focus on driving cost efficiencies, the analyst observed.

The company’s performance shows evidence in the success of its PVH+ strategy, in the analyst’s view, to become closer to the consumer while driving engagement and lifestyle brand positioning.

Also, bringing the TH and CK licenses in-house allows PVH greater control over its brands and provides incremental opportunities to drive growth longer-term.

For Q2, the analyst looks for an EPS of $1.70 vs. $2.08 last year and revenue growth of 2.6% to $2.188 billion.

Price Action: PVH shares are trading lower by 0.69% at $80.03 on the last check Tuesday.