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Robert Stephens, CFA
Robert Stephens, CFA
Articles (174) 

PVH Has Turnaround Potential After Falling 18%

The company’s revised strategy could lead to a recovery

April 23, 2019 | About:

Having fallen 18% in the last year, PVH Corp.'s (NYSE:PVH) stock could deliver improved returns. The international branded fashion company is refreshing its marketing strategy, seeking to focus on digital growth opportunities and greater product differentiation.

In addition, there are international growth opportunities ahead. Increasing investments in China, as well as recent acquisitions in Australia, could enhance the competitive position of the business.

Although retail sales in the U.S. have been under pressure lately, the stock appears to offer good value and has improving earnings forecasts for the next two fiscal years. This suggests that it has investment potential.


Strategy shift

Major changes are being made to the company’s marketing strategy, which could improve its financial performance. It is seeking to focus on consumer engagement and data capabilities as it aims to improve the shopping experience across a number of channels. In doing so, PVH is bringing greater personalization to its brand in order to improve customer loyalty. This includes a number of new campaigns that feature several social media influencers as well as sponsorship of major events such as the Coachella Music and Arts festival.

Digital growth is also expected to become an increasingly important part of the company’s future. It has introduced collaborations with pure-play digital commerce retailers, which helped boost digital revenue in the most recent fiscal year by over 20%. Digital sales now represent over 10% of total revenue.

As part of its shift toward a greater focus on digital growth, PVH is investing in pop-up shops and brand collaborations in order to boost its omnichannel offerings. This includes store closures in longstanding locations such as New York and Miami as the company seeks to appeal to younger, more digitally-focused consumers.

International growth

PVH is investing heavily in its growth opportunities outside of North America. For example, it is expanding the number of categories it offers for its Tommy Hilfiger and Calvin Klein brands in China. Although Chinese retail sales growth has slowed in recent quarters, it is expected to surpass the U.S. for the first time in terms of total retail sales in 2019. The company is also seeking to provide increasingly customized brand experiences for consumers in order to differentiate itself from competitors. In additon, the decision to directly run its Tommy Hilfiger brand in Hong Kong, Macau and several other countries could leverage its strong Asian platform.

The company's acquisition of Australian clothing company Gazal Corp. Ltd. (ASX:GZL) could stimulate growth. The deal, which was announced in February, will increase PVH’s exposure to Australia, where growth is expected to be reported across all of its brands in the medium term. 


PVH has seen a softer overall retail environment in North America since January. It recorded a decline in comparative sales in the high single-digits at Calvin Klein and Heritage in the most recent quarter, while Tommy Hilfiger sales declined at a low single-digit rate over the same period. The company is adopting a cautious stance on its North American sales prospects, while weakness in other markets such as Korea means its near-term growth potential may be limited.

In response, PVH is making major changes to its structure, seeking to streamline its operations in order to improve efficiency. This includes increasing productivity in its stores, while also adopting a greater focus on efficient inventory levels across its estate.

Although retail sales in the U.S. were weak early on in the year, figures for March showed the biggest increase in 18 months. Alongside this, the number of Americans filing for unemployment benefits fell to the lowest level in 50 years. This suggests the outlook for consumer goods companies could improve.


In 2019, PVH is forecasted to record earnings per share growth of 8%. In the next fiscal year, 10% growth is expected. This suggests the stock offers good value trading with a price-earnings ratio of 13.5.

With the company expected to benefit from the implementation of a refreshed marketing strategy over the medium term, further growth could be ahead. International growth could catalyze its overall performance, while an improvement in the performance of U.S. retail sales may boost investor sentiment and lead to stronger trading conditions.

Although the stock has underperformed the S&P 500 in the last year, it could offer turnaround potential over the long term.

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