They Hit Our First Two Price Targets, Next Up: Our Third

October 28, 2022
Consumer Discretionary Investing Strategies

 PVH Corp has been an absolute monster of a stock since we first wrote them up in in June of 2020. Back then the stock was trading at $53 and as of today (September 3, 2021) it is trading at $120 (126% gain). Since they recently hit our price target of $115, we decided to further look into the company again to see if they warranted a higher price target. The outcome was unexpected.

  • Before we jump into it, let’s give a quick overview on who PVH is for our newer readers. PVH is the parent company to clothing brands like Tommy Hilfiger, Calvin Klein, Warner’s, Phillips-Van Heusen, Olga and True & Co. The company also licenses brands such as Kenneth Cole and Michael Kors.

PVH Expected Stock Price:

With that context, the outcome for PVH is that we’re actually raising our price target. Even with the stock up 101% in the last year, we think there’s more room to run. The stock hit all of our projected numbers and we’re shocked how resilient they are. Let’s jump into why we think so below:

One of PVH Corp’s Most Popular Brands: Tommy Hilfiger

  • Continued margin expansion: This is something we’ve discussed for some time now as PVH continues to optimize their GTM (go to market) in two ways. The first is via their continued push from brick and mortar sales to e-commerce sales and the second is via supply chain optimization. The shift towards online shopping is something we’ve discussed time and time again and is the reason some retailers are doing well while others are falling behind. Look no further than our post last week on Dick’s Sporting Goods where we discuss their dominance (as well as Nike’s) in the shift to online sales. It is one of the largest reasons all of these companies have performed so well over the last 12 months and is why their stock price has continued to grow! PVH is no exception to this and has been making the necessary changes for years now. We think there is still so much more room to go though and that is why we think they can continue to bring margins even higher! Pair this with the optimization of their supply chain and their growth story is far from over.
  • International Growth: Looking at their international business, we see that it is still growing nicely (above what was expected). This was a large driver of growth as revenues here have grown over 20% since 2019! It also has helped their operating margins since 2019 as they’ve expanded roughly 5-6% (which is no small feat). International growth is a relatively newer driver for them and is something we’re actively monitoring to see if it warrants another price target change upwards in the coming quarters.
  • Core Brands: We also wrote about this briefly last time but Calvin Klein and Tommy Hilfiger are driving a lot of their growth. PVH has doubled down on their core brands as a point of emphasis for the future of their company. Even with store shutdowns worldwide, these two brands drove strong growth for their parent company. Given how long this has been going on and the strength of their growth, we anticipate for this number to continue longer than we originally anticipated.

 

PVH Corp Wrap-up:

The growth levers and our thesis on PVH has not changed for some time now. What has changed however is how strong these levers are and continue to be. PVH is blowing past everyone’s expectations and we’re happy to update our price target to reflect this newfound and sustainable growth. A strong name to continue holding through the global reopening, PVH should be a leader in the clothing industry for some time to come.

With the stock up so much over the last year there could be some short term volatility in the next 6 months, but this is a stock we’re going to hold onto for the next several years before considering selling it!


Price Target: $135 (~13% upside)

Target Date: 6-7 Months

Rating: Overweight

Ticker: PVH

Dividend Yield: 0%

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