TD Cowen lowers PVH rating to Hold on structural risks, shares down

Investing.com -- PVH (NYSE:PVH) shares slid 1.7% in premarket trading Wednesday after TD Cowen lowered the rating on the stock to Hold and the price target to $74, citing intensifying competition, rising tariffs, and weakening wholesale data as structural risks to the business.

The firm also lowered its earnings estimates, placing them below consensus for fiscal 2026.

The bank’s analysts flagged growing inventory and an increasingly promotional environment as major concerns for the Tommy Hilfiger and Calvin Klein owner, noting that the broader category has seen no inflation since fiscal 2022.

“Recent sector valuation expansion leaves us less optimistic on sentiment/positioning,” the team said.

Checks across department stores and outlet channels remain mixed, with TD Cowen highlighting a tough August back-to-school comparison. Although PVH is pursuing product elevation strategies, those efforts appear at odds with the rise in promotional activity.

The broker also pointed to competitive challenges, especially from Ralph Lauren (NYSE:RL).

“RL’s comps in Europe +18% and Asia +15% along with store growth potential will render Tommy Hilfiger’s return to durable growth challenging,” the report says.

Google (NASDAQ:GOOGL) Search trends across Tommy Hilfiger’s key European markets show share loss, particularly to Ralph Lauren.

TD Cowen believes PVH needs to increase its marketing and direct-to-consumer investment, suggesting the company’s 4.5% marketing spend should rise by 100–200 basis points.

Tariffs are another key overhang, with the analysts expecting rates to move “materially higher than 10%” under recent U.S. policy.

Their base case assumes a 25%+ rate across the Southeast Asia supply chain, putting pressure on PVH’s full-year 2025 (FY25) guidance and likely carrying into FY26. The firm estimates a $11.70 EPS for FY26, below the $12.26 consensus.

While PVH trades at 5x FY25E EV/EBITDA—a roughly 18% premium to peers like Abercrombie & Fitch (NYSE:ANF), Gap Inc (NYSE:GAP), American Eagle (NYSE:AEO), and Hugo Boss (ETR:BOSSn)—analysts argue the stock lacks near-term upside.

“PVH’s Return on Invested Capital (ROIC) now sits at 11% – among the lowest in the peer group,” they noted.

TD Cowen had upgraded PVH in February 2024 based on expectations of improved visibility into achieving a mid-teens EBIT margin. However, the firm now forecasts just 8% for fiscal 2025, a 20-year low.

The bulk of the EBIT for Calvin Klein and Tommy Hilfiger comes from the EMEA region and the licensing business, which together account for 77% of earnings excluding unallocated items. The continued transition within the licensing model is expected to further pressure margins, analysts said.