PVH Sees Continued Growth

FBR expects the fashion firm to see continued success for the Calvin Klein and Tommy Hilfiger brands in both the domestic apparel market and international markets.

NORTH AMERICA–Capital markets firm FBR Capital Markets is reiterating its buy rating, estimates and $138 price target for PVH Corp., following an investor meeting with the company’s management.

PVH Corp. is the world’s No. 3 largest licensor, reporting $18 billion in licensed retail sales in 2016, according to License Global’s annual Top 150 Licensors report.

According to FBR, PVH’s management is confident about the continued wholesale share gains, product category rollouts and overall brand expansion, particularly in overseas markets, for Calvin Klein and Tommy Hilfiger. The fashion firm is also optimistic in regards to its ability to maintain “reasonably constructive trends” within the domestic apparel retail market.

FBR is also confident that PVH will achieve its mid- to high-single-digit sales growth target, as well as incremental margin expansion.

Delving into PVH’s brands, the company’s management notes that penetration of Calvin Klein in the European market is less than half of that enjoyed by Tommy Hilfiger. The company also noted that the Calvin Klein brand only offers branded jeans, underwear, accessories and a small portion of menswear in the region; however, there is a planned launch of womenswear and performance apparel in fall 2018. In addition, PVH will leverage the wholesale network that supports the Tommy Hilfiger business to further grow and support Calvin Klein in Europe.

For Tommy Hilfiger, PVH is turning its focus to the Asian market, where the brand’s sales in the region scales approximately $150 million to $200 million. However, roughly 80 percent of that revenue contribution was from menswear, predominantly sportswear, and given the homogeneity, there is a substantial opportunity to further drive brand sales through the introduction of denim as well as women’s product lines.

Finally, PVH is still making strides in navigating the “changing tides” of the domestic retail market. The company’s management notes that it was one of the first to partner with Amazon as a wholesale distributor of its branded products. Management also cites operating expense, capital expenditure, investment in e-commerce, marketing and consumer insights as the most critical areas of focus. PVH also believes that it will continue to gain incremental wholesale market share in the domestic market, with most competing brands pulling back wholesale distribution or investments in marketing/position of their brands and fashion.

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