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PVH Corp (NYSE: PVH) recently passed a 52-week low immediately following its third-quarter report, which showed an earnings beat but sales miss.
Wells Fargo: 'The Story Doesn't Appear To Be Unraveling'
Gross margin weakness at Calvin Klein was largely responsible for the difficult quarter and keeps PVH in the penalty box, according to Wells Fargo analyst Ike Boruchow.
All is not lost, the analyst said, adding that he believes management is confident on inventory positioning heading into the fourth quarter, as Calvin Klein is better-positioned from a merchandise perspective.
PVH CEO Emanuel Chirico said he is highly confident CK margins will expand 75-100 basis points in 2019, a call that Boruchow said is a stark change of trajectory considering CK margins have declined in six of the past seven years.
“All in, while we acknowledge the fundamental issues the past six months, it is important to understand that the story doesn’t appear to be unraveling: inventory/GM outlook is now healthy, holiday QTD momentum appears compelling and 2019 drivers are in place."
Wells Fargo maintained an Outperform rating on PVH and lowered the price target from $180 to $140.
Cowen: Hilfiger A Bright Spot
While there is room to expand Calvin Klein segment margins next year, the stock lacks catalysts until March 2019, and “tariffs loom," Cowen's John Kernan said in a note.
Calvin Klein’s miss was entirely due to the CK Jeans relaunch, which wound up too expensive and fashion-forward for the CK customer, the analyst said.
Tommy Hilfiger remains a bright spot for the company, with sales up 11.7 percent in Q3 and sales growth in all regions and channels, he said.
Cowen maintained an Outperform rating and lowered the price target from $150 to $142.
PVH shares were up 0.67 percent at $110.51 at the close Friday.
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