PVH Corp (PVH) Down 8.5% In 3 Months: Can Efforts Aid Revival?

PVH Corp. (NYSE:PVH) stock has been in troubled waters during recent months due to issues at its Calvin Klein brand, which affected its top-line performance in the last reported quarter. In the past three months, shares of this New York, NY-based company have declined 8.5% against the industry’s 2.9% growth.

Nevertheless, the company posted 18th consecutive positive earnings surprise in the third-quarter fiscal 2018. Moreover, PVH Corp witnessed robust momentum at Tommy Hilfiger brand, which reflects its strength. That said, let’s take a closer look at the factors impacting the company’s performance.

Hurdles in PVH Corp’s Path

In third-quarter fiscal 2018, PVH Corp witnessed softness across Calvin Klein, which is one of the company’s most lucrative brands. Weakness in Calvin Klein’s 205 W39 NYC halo business and issues related to its Jeans business due to fashion miss negatively impacted the brand’s results. While Calvin Klein’s comparable-store sales (comps) declined 2%, its EBIT fell 15% year over year.

Management has been striving to fix these issues and expects to witness improvements in the next fiscal year. Soft Calvin Klein business also dented the company’s overall top line, which lagged estimates for the first time in the last nine quarters.

Additionally, PVH has been witnessing sluggish growth at the Heritage Brands division in comparison to its other segments. This has further contributed to decline in shares over the course of a year.

Can Efforts Aid Recovery?

PVH Corp’s Tommy Hilfiger brand remains the company’s key strength as the brand continues to put up spectacular performance worldwide. In the third quarter of fiscal 2018, the brand’s revenues increased 11%, with 13% growth in constant currency. International revenues at the segment were up 16% (19% in constant currency). Improvement in all regions and channels, and comps growth of 13% aided results. Additionally, the brand’s North America business witnessed 3% revenue growth.

Recently, management raised its adjusted profit forecast for fourth-quarter and fiscal 2018. For the fiscal year, adjusted earnings per share are estimated to be at or above $9.50 compared with $9.33-$9.35 projected earlier. For the fourth quarter, management anticipates adjusted earnings per share of minimum $1.75, which is 15 cents higher than the upper-end of its prior-guided range of $1.58-$1.60. This guidance comprises 5 cents per share gain from lower income tax expenses. Moreover, the current earnings projection reflects a 10.8% rise from the year-ago quarter. The company’s robust diversified business model led to the upbeat guidance.

Notably, the Zacks Consensus Estimate of $1.75 for the impending quarter and $9.48 for fiscal 2018 has moved up 15 cents and 12 cents, respectively, over the past 30 days.

PVH Corp’s efforts to resonate well with the evolving consumer trends and efficient brand management approach should also aid results. Meanwhile, the company’s international business remains sturdy owing to solid performance in Europe and Asia.

All said, the company’s growth drivers and solid earnings potential should counter the aforementioned challenges. We believe this Zacks Rank #3 (Hold) stock should return to growth in the quarters ahead.

Don’t Miss These Solid Textile-Apparel Picks

Some better-ranked stocks in the same industry are G-III Apparel Group, Ltd. (NASDAQ:GIII) , Crocs, Inc. (NASDAQ:CROX) and lululemon athletica inc. (NASDAQ:LULU) .

G-III Apparel outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Crocs has a long-term earnings growth rate of 15% and a Zacks Rank #1.

lululemon delivered average positive earnings surprise of 19.5% in the trailing four quarters. It currently carries a Zacks Rank #2 (Buy).

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