PVH Corp

PVH's second-quarter sales fell 3% on flat Tommy Hilfiger sales (54% of total) and a 7% Calvin Klein sales decline (44%). Including a 510-basis-point tariff refund benefit that was partially offset by increased marketing spending, PVH's adjusted operating margin rose 290 basis points to 11.1%.

Why it matters: CEO Stefan Larsson continues to implement the PVH+ plan to lower expenses while investing in advertising and merchandise. Although there are signs of progress, these investments have yet to drive broad sales growth and have, thus far, offset some of the benefits of cost-cuts. As such, PVH announced a renewed expense efficiency effort. Although beneficial, we expect marketing and products costs will remain high in a very competitive space. Long term, we forecast 3%-4% yearly sales growth and 10% operating margins, up from 8%-9% presently. PVH's quarterly sales were near our estimate, but its operating margin (excluding the tariff refund) was about 120 basis points better due, in part, to a shift in some marketing expenses and lower product costs.

The bottom line: We do not expect to make any material change to our $128 fair value estimate on PVH's shares, leaving them very undervalued. We think investors are focused on short-term challenges and overlook the potential for more consistent sales growth and profitability after PVH+. PVH maintained its 2026 guidance, including flat sales and adjusted EPS of $11.80-$12.10. With continuing soft consumer spending in Europe, the Middle East, and Africa, PVH's outlook implies second-half margins below expectations. However, the impact on our valuation is minimal. As suggested by our no-moat Morningstar Economic Moat Rating, we think PVH's brands lack the pricing power to overcome weak economic conditions. Nonetheless, they are global and have growth prospects. For example, Calvin Klein women's jeans benefit from the move to direct control from licensing.

Alexis Rollier will come aboard as PVH's chief financial officer on Sept. 7. We think Rollier is a strong choice to help implement PVH+ as he has experience in growing a business while improving margins as finance and operations leader at wide-moat LVMH's Sephora.

We hold our fair value estimate of $128 per share.

In the second quarter, PVH's sales fell 3% on flat Tommy Hilfiger sales and a 7% Calvin Klein sales decline. Including a 510-basis-point tariff refund benefit that was partially offset by increased marketing spending, PVH's adjusted operating margin rose 290 basis points to 11.1%. Its quarterly sales were near our estimate, but its operating margin (excluding the tariff refund) was about 120 basis points better—due, in part, to a shift in some marketing expenses and lower product costs.

For 2026, we forecast revenue will decline by less than 1%. Including the tariff refund, we forecast an 8.8% adjusted operating margin (up from 8.7% previously) and $12.09 in adjusted EPS (from $12.07). For 2027, we forecast 2% revenue growth, $1 billion in EBITDA (11.6% margin), and $12.46 in EPS. Based on our 2027 estimates, our fair value estimate implies price/earnings of 10 and an enterprise value/EBITDA of 8.

We forecast sales declines of 0%-1% for Calvin Klein and Tommy Hilfiger in 2026. Beginning in 2027, we estimate annual sales growth rates of approximately 3%-4% for both brands.

PVH once targeted $12.5 billion in 2025 sales, but this goal proved to be far out of reach. We forecast the company's revenue will increase to $12 billion in 2035 from $9 billion in 2025, a compound average annual growth rate of 3%. There could be upside in our estimate if marketing and merchandise efforts prove to be more effective than we anticipate.

After 2027, we forecast low- to mid-single-digit annual sales growth rates for PVH in all three of its regions (the Americas, Asia-Pacific, and Europe, Middle East, and Africa). In EMEA, PVH’s largest region (47.7% of 2025 sales), we forecast 18.5% EBIT margins after 2028. In the Americas (30.6% of sales) and Asia-Pacific (16.9%), we anticipate EBIT margins in the low teens and low 20s, respectively, in the long run.

We estimate PVH’s 2026 gross margin at 58.7%, but this includes a tariff refund. For 2027, we forecast a 57.6% gross margin, close to 2025’s level (57.5%). PVH has targeted gross margins above 60% under its PVH+ plan, but we do not think this can be achieved due to competitive pressures. Instead, we forecast 58% gross margins in the long run.

We anticipate an average adjusted operating margin of about 10% for PVH over the next decade. Although this would be an improvement over recent levels (around 9%), PVH has targeted an even higher 15%. We view this goal as too aggressive, given rising costs and our view that the firm lacks a competitive advantage. Our estimates do not include any contributions from acquisitions.

Our long-term tax rate estimate for PVH is 22%, which is generally above (very low) historical levels. PVH's tax rate spiked in 2022 due to the expiration of favorable tax treatment in the Netherlands, the end of royalty payments to Calvin Klein himself, geographic mix, and other reasons.

PVH has a Morningstar Economic Moat Rating of is none. The firm's largest brands, Tommy Hilfiger and Calvin Klein, each generate about $9 billion in annual global sales through both PVH-produced and licensed merchandise. However, the company has struggled to meet sales and profitability goals, and we do not believe that either brand has significant pricing power or market share in the highly competitive apparel space. PVH's annual adjusted returns on invested capital (including goodwill) have averaged a subpar 7% over the past decade, short of our estimated weighted average cost of capital of 9%. Although we forecast some improvement in ROICs over the next decade (9% annual average), we expect that returns will remain disappointing for a firm that outsources manufacturing and generates significant licensing revenue.

PVH is one of the largest global apparel companies with about $9 billion in annual revenue, 98% of which is attributable to Tommy Hilfiger and Calvin Klein. The company operates 1,400 stores worldwide and another 1,500 shop-in-shop and concession locations and has a large wholesale operation, including roughly 5,000 licensed or franchised stores (mostly in the Asia-Pacific region). However, in our view, neither Tommy Hilfiger nor Calvin Klein qualifies as a premium brand across most categories.

The disappointing PVH+ plan results and margins affirm that PVH lacks a competitive edge. In 2022, the company revealed its PVH+ plan to focus on product enhancements, stronger e-commerce, inventory management, and cost reductions. As part of this plan, PVH targeted $12.5 billion in revenue, 15% operating margin, and more than $1 billion in free cash flow in 2025. Although we believe PVH has made progress under PVH+, it fell far short of these financial targets. Indeed, its adjusted operating margins have been stuck around 9%-10% for much of the past decade, even though it sold or discontinued most of its low-margin heritage brands. Ultimately, PVH has had to spend more to support its two major brands, so its adjusted selling, general, and administrative expenses (excluding depreciation and amortization) have increased to 46% of sales from 42% in 2019 despite cost control efforts.

Preppy and patriotic Tommy Hilfiger is a popular designer lifestyle brand, but we do not view it as a premium brand. The label is affixed to a huge variety of products at many price points and is available in dozens of countries. However, most of its apparel and accessories are sold at modest prices and profit margins. Among other issues, the brand’s products are distributed to struggling department stores and other discount retailers in North America. Such stores consistently sell Tommy Hilfiger apparel at large discounts. Moreover, even at full price, the brand does not typically command high prices. Meanwhile, most company-owned Tommy Hilfiger stores in North America are outlets.

Tommy Hilfiger has a significant international business, but we do not think it has a competitive advantage. The brand generates significantly more sales in Europe than in the US. However, its European results have been uneven of late. Although PVH’s management is attempting to bolster Tommy Hilfiger in Europe by cutting some low-margin digital distribution, we do not think it will be enough to improve its competitiveness materially.

We do not believe Calvin Klein has a competitive advantage either. Like Tommy Hilfiger, Calvin Klein’s relevance in its home market has waned. PVH has tried to elevate the brand in its home market for years, but without much success. Some Calvin Klein items, such as men’s underwear, carry premium prices. However, the brand’s share of this category in North America is small and declined to 1.8% in 2025 from 3.5% in 2017 (Euromonitor). Similarly, Calvin Klein’s share in US men’s standard jeans fell to 2.1% in 2025 from 3.9% in 2018. Like Tommy Hilfiger, Calvin Klein has been adversely affected by the weakness of wholesale partners, excessive exposure to company-owned outlets, and rising competition.

Calvin Klein is a global brand, but it lacks dominance in any specific region or category. The label has much less than 1% apparel market share in Asia-Pacific and Western Europe, and there are no signs of share gains. As in North America, the brand lacks pricing power in international markets.

PVH’s lack of direct control limits the brand strength of Calvin Klein and Tommy Hilfiger. Both brands have approximately 35 individual licenses worldwide and are likely overexposed to crowded categories. PVH’s management is aware that its lack of direct control has been a problem and has been acquiring or ending some deals. One crucial current effort is the staggered exit of various licenses for women’s clothing, accessories, and other items from longtime licensee G-III. Although we regard this as an essential step, it remains to be seen whether PVH’s control will generate material sales and profit gains from these categories.

PVH has chosen to focus on its two large brands at the cost of diversification. The firm owned a handful of smaller brands, known as its heritage brands, but most of them were divested in separate transactions in 2021 and 2023. These brands were sold because they were experiencing declines in sales and profitability and managing them was a distraction to management.

We do not think PVH has a moat based on any intangible assets or other criteria. Nearly 100% of its production is handled by roughly 1,000 factories in more than 30 countries that are not owned by the company, indicating that PVH has no cost advantage over the many other apparel companies with similar outsourcing models. We do not believe PVH has a moat based on scale, either, because it lacks a company-owned supply chain or superior access to raw materials. There is no network effect in the apparel business, and switching costs are nonexistent.

Calvin Klein and Tommy Hilfiger have proven global strength, with the potential for higher sales in Asia, Europe, and the Americas. PVH has taken greater control of its brands through acquisitions, allowing improved marketing and pricing.

PVH has paid down debt and resumed share repurchases and dividends. Over the next decade, we anticipate it will continue to lower its debt while consistently buying back stock.

The PVH+ plan has the potential to transform the company as product enhancements, investments in e-commerce, cost cuts, and better inventory control are implemented.

Although well known, PVH’s brands are overly exposed to outlet and discount channels. Consistent discounting has reduced brand value, pricing, and margins.

Most of PVH’s operating income is generated outside North America, especially in Western Europe. So, the firm has outsize risk related to currency movements and the health of the European economy.

China’s Ministry of Commerce has initiated actions against PVH that could result in it being unable to operate in the country. PVH sources merchandise and generates about 15% of its EBIT in China.