PVH Corp: Hidden Value in a Discounted Luxury Play

PVH Corp (NYSE: PVH) delivered a fiscal Q1 2025 earnings report that mixed encouraging brand momentum with sobering macroeconomic realities. While the company's stock trades at a valuation that would make Warren Buffett blush—its P/E ratio of 6.58 is 66% below its 10-year average—the data under the hood suggests this apparel giant could be primed for a rebound. Let's dissect why investors might want to take a bite now.

Brand Power: The Calvin Klein Comeback and Tommy's Steady Climb

The report's brightest spots were its two luxury brands, Calvin Klein and Tommy Hilfiger.

• Calvin Klein: Revenue stagnated at flat growth, but this masks a critical win. Its new Icon Cotton Stretch line, propelled by Bad Bunny's viral campaign, is a clear hit. The Puerto Rican superstar's 100 million TikTok followers amplified the launch, creating a modern "must-have" product. Management emphasized that the campaign's social media engagement was "off the charts," and inventory is now being restocked.

• Tommy Hilfiger: Revenue rose 3%, with EMEA and Americas leading the charge. The brand's partnership with F1® The Movie added buzz, and direct-to-consumer sales grew 8% in the Americas. These are not trivial gains; Tommy's premium positioning in key markets like the U.S. and Europe positions it well for recovery as discretionary spending stabilizes.

The EPS Drop: A One-Time Hit or Structural Problem?

GAAP EPS cratered to -$0.88 due to a $480M noncash goodwill impairment charge, but this is a paper loss, not a cash expense. Non-GAAP EPS of $2.30 beat estimates and highlighted operational resilience. The real concern is the full-year EPS guidance cut to $10.75–$11.00, down from $12.40–$12.75, reflecting tariff impacts and margin pressures.

• Margin Pressures: Gross margins fell 280 basis points to 58.6%, hit by freight costs and promotional activity. These are cyclical issues, not structural. The company's Growth Driver 5 cost-savings program aims to offset $250M in annualized expenses by 2026—a plan that, if executed, could stabilize margins.

• Tariffs: A $1.05 EPS headwind in 2025 is daunting, but management noted 70% of goods are now sourced from Mexico to avoid Chinese tariffs. This strategic pivot should reduce the drag over time.

Valuation: The Stock Is a Bargain, Even With the Downgrade

PVH's EV/EBITDA of 5.25 is starkly undervalued compared to peers:
- Tapestry (TPR): 14.04x
- HanesBrands (HBI): 14.48x
- Iconix (ICON): 21.30x

This is a stark discount for a company with two globally recognized brands. The stock trades at just 6.58x trailing earnings—well below its 18.25x 10-year average—and offers a 23.5% YTD return versus the S&P 500's 1.5%. The Zacks Rank #3 ("Hold") seems overly cautious given the valuation and brand momentum.

The Bull Case: Why Now Is the Time to Buy

1. Undervalued Brands: Both Calvin Klein and Tommy Hilfiger are premium lifestyle brands with global reach. Their direct-to-consumer sales (up 7% in the Americas) suggest a shift to higher-margin retail, which could boost margins long-term.

2. Tariff Mitigation: The move to Mexico reduces a key overhang. Once tariff costs stabilize, EPS could rebound sharply.

3. Buybacks and Leverage: With $500M in share repurchases completed and leverage at a manageable 0.31 debt-to-equity ratio, the balance sheet is strong enough to weather near-term storms.

4. Intrinsic Value: A discounted cash flow analysis estimates PVH's intrinsic value at $170.98—89% above its current price of $80.84.

The Bear Case: Risks to Consider

• APAC Weakness: China's consumer slowdown cut APAC revenue 13%, and recovery timelines are unclear.
• Inventory Build-Up: A 19% inventory jump risks overstocking if demand doesn't rebound.
• Zacks Rank Caution: The #3 rating reflects near-term uncertainty, though not the full picture of PVH's value.

Verdict: Buy the Discount, Ignore the Noise

The stock's valuation is screaming "buy" for investors with a 12–18 month horizon. While tariffs and China's recovery are risks, the core brands' strength and the EV/EBITDA discount suggest a margin of safety. The viral Calvin Klein campaign and Tommy's F1® push are not one-offs—they're part of a deliberate strategy to dominate in premium basics and lifestyle apparel.

If you can stomach short-term volatility, PVH offers a rare chance to own two global brands at a fraction of their historical valuation. The next 12 months will test management's execution, but the math here is hard to ignore: this is a stock to buy on weakness, not sell into it. Historical performance supports this strategy: a backtest from 2020–2025 shows that buying PVH on the ex-date of quarterly earnings announcements and holding for 20 trading days delivered positive returns, as the stock often surged after earnings reports.