Analyst Confident PVH's Growth Story Is Intact

Tommy Hilfiger and Calvin Klein's parent company PVH Corp PVH reported in-line first-quarter results but management's outlook for the second quarter was disappointing. Nevertheless, Bank of America has "confidence" in the company's ability to show growth in the bottom half of the year.

The Analyst

Bank of America's Heather Balsky maintains a Buy rating on PVH's stock with an unchanged $165 price target.

The Thesis

PVH saw revenue falling short of expectations as sales slowed late in the quarter, Balsky wrote in a note. The momentum carried forward as management highlighted a weak start to the second quarter although this is consistent with the broader retail sector. As a result, management's second quarter earnings guidance range of $1.85 to $1.90 was "well below" the Street's model of $2.43.

Despite near-term challenges and concerns, "nearly every" apparel company told investors they are expecting an acceleration in the back half of the year, the analyst wrote. PVH could prove to be among the best positioned to show acceleration due to multiple catalysts, including improved marketing and products at Calvin Klein, sales and earnings benefits from acquisitions like Gazal and the core brands are share gainers in the U.S. wholesale channel.

Management lowered its full-year EPS guidance range. The guidance assumes softer comparisons in the back half of the year and improvement in tourist spending from more favorable foreign exchange trends.

Price Action

PVH shares traded lower by 13.5 percent at $85.85 Thursday afternoon and hit a new 52-week low of $85.01 earlier in the day.

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