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On Friday, TD Cowen analysts adjusted the price target for PVH Corp (NYSE:PVH), the parent company of iconic brands Tommy Hilfiger and Calvin Klein, signaling a cautious yet optimistic stance on the company’s future performance. The new price target has been set at $110.00, a decrease from the previous $134.00, while the firm maintained a "Buy" rating on the stock. According to InvestingPro data, PVH currently trades at an attractive P/E ratio of 5.15x, suggesting potential undervaluation relative to its peers. The stock has experienced significant pressure, declining over 52% in the past year.Want deeper insights? InvestingPro subscribers have access to 13 additional exclusive tips and comprehensive analysis for PVH Corp.
The analysts highlighted the need for PVH Corp to demonstrate further progress in its PVH+ plan, which focuses on improving the consistency of merchandising and marketing strategies, as well as stabilizing the flow of EBIT and Free Cash Flow. Despite the initial guidance for Fiscal Year 2025 (FY25E) that anticipates a return to top-line organic growth and a trajectory toward a mid-teens long-term adjusted operating margin, there remains a broad spectrum of investor opinions. Many investors are bracing for a potential decline in earnings per share (EPS) by 5% to 10% year-over-year. The company maintains impressive gross profit margins of 60% and has generated substantial free cash flow of $715 million in the last twelve months.
PVH Corp’s recent performance has faced challenges, including a sales decline of 7% in both the fourth quarter of 2024 and the full fiscal year. The company’s FY25E revenue projection is modeled at a 1% year-over-year decrease. Factors such as quality of sales initiatives have created a 500 basis point headwind in FY24, while the impact of spot foreign exchange rates has been less detrimental than initially feared earlier in the year. Despite these headwinds, management has demonstrated confidence through aggressive share buybacks, and the company has maintained dividend payments for 55 consecutive years.Discover more about PVH’s financial health and access the comprehensive Pro Research Report, available exclusively on InvestingPro.
The analysts underscored the current market conditions, noting that valuations for Specialty Retail are near five-year lows. This raises questions about the future evolution of the sector, which is grappling with increased competition and uncertainty in supply chain and trade policies. TD Cowen is keen to observe more direct-to-consumer (DTC) elevation on a global scale.
PVH Corp’s stock valuation has fluctuated significantly, bottoming out at 5 times FY2 P/E in the fall of 2022 and contrasting with a peak valuation of 9 times in early FY24. The current valuation stands at 6 times, as the company seeks to navigate through these trying times and capitalize on its turnaround potential at what is considered a trough valuation.
In other recent news, PVH Corp has been placed on China’s List of Unreliable Entities, a move that may significantly impact the company’s operations in the crucial Chinese market. This development follows an ongoing investigation into PVH’s activities related to Xinjiang, with preliminary findings suggesting possible inappropriate conduct. The investigation, initiated by Chinese authorities, could lead to punitive measures such as monetary fines and restrictions on PVH’s import, export, and investment activities in China. Meanwhile, Citi analyst Paul Lejuez has adjusted PVH Corp’s stock price target from $123 to $72, maintaining a Neutral rating. Lejuez expects the company’s fourth-quarter sales to decline by 6.5%, slightly worse than the consensus estimate, but anticipates earnings per share to exceed both consensus and company guidance.
In leadership changes, PVH Corp announced that Erik Graf will succeed James Holmes as Executive Vice President and Controller, effective May 1, 2025. Holmes will remain with the company until October 2025 to assist with the transition. Graf, who has been with PVH since 2010, will receive a compensation package that includes a base salary and participation in the company’s incentive plans. The leadership change comes amid PVH’s ongoing challenges, including the impact of its inclusion on the Unreliable Entities List. Investors are closely watching these developments, given the potential implications for PVH’s financial performance and operations.
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