Citi Stays Sidelined On PVH Despite Q2 Beat And Raise

PVH Corp PVH reported Q2 results ahead of expectations and raised its full-year guidance. Citi’s Kate McShane maintained a Neutral rating on the company, citing “ongoing industry challenges in North America.” The price target has been raised from $96 to $110.

PVH was among the few vendors to report a Q2 beat and raise its full-year guidance, analyst McShane noted. The company witnessed robust global demand for its two key brands - CK and TH - and also exhibited strong expense control.

Tough US Trends

Although management believes the brands are “well positioned to benefit from a strong back-to-school and holiday ’16 season,” they also acknowledged that US retail trends had continued to be challenging through August, and lowered US comp expectations for 2H16, McShane mentioned.

Despite the tough US retail environment, PVH appears “better positioned y/y as we head into fall, with mgmt highlighting clean inventories (up 0.7% y/y including Tommy China acquisition) and “very healthy” wholesale orders,” the analyst commented.

On The Sidelines

The positives already seem to be priced into PVH’s shares, with the stock trading at a modest premium to its 3-year average. McShane added, “We maintain our Neutral as our view of PVH is largely unchanged on the report despite the Q2 beat, with ongoing industry challenges in North America.”

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