PVH Corp: A Margin Makeover Play at a Fire Sale Price

The fashion world is in turmoil—tariffs, weak consumer spending, and relentless promotions are squeezing margins. Yet PVH Corp (PVH) isn't just surviving—it's fighting back with a playbook that could turn its undervalued stock into a winner. With a forward P/E of just 6.1x, this Calvin Klein and Tommy Hilfiger parent company is offering a rare chance to buy a brand powerhouse at a discount. But will its cost cuts and product pivots offset the pain? Let's dig in.

The Margin Meltdown—and Why It's Overdue for a Fix

PVH's Q1 2025 earnings were a mixed bag. Revenue rose 2%, but operating margins are expected to drop to 8.5% in 2025 from 10% in 2024. The culprits? U.S. tariffs (a $1.05 drag per share) and a shift to lower-margin wholesale sales. Gross margins plunged to 58.6% from 61.4% as PVH sold more discounted inventory and struggled with delayed Calvin Klein shipments.

But here's the key: This isn't a permanent problem. Management has already started flipping the script.

The Turnaround Trio: Cost Cuts, Brands, and Inventory

1. Cost-Saving Machine: Growth Driver 5

PVH's $200 million multi-year cost initiative (Growth Driver 5) is in full swing. First-quarter restructuring costs hit $13 million, but the payoff is coming. By centralizing operations and automating processes, PVH aims to slash expenses. CEO Stefan Larsson says this is “not just about cutting—it's about reinvesting in the brands.”

2. Brand Power: Icon Cotton and Hollywood Magic

Calvin Klein's Icon Cotton Stretch line is a hit, driving loyalty with premium basics. Meanwhile, Tommy Hilfiger's collaboration with a major movie franchise (think global marketing buzz) is set to ignite sales. These aren't just products—they're cultural moments that command higher prices.

3. Inventory Reset: The “Summer Readiness” Play

PVH's inventory jumped 19% year-over-year, but this isn't a red flag—it's a strategic move. The company is stockpiling core items like summer dresses and swimwear to avoid past shortages. CFO Zac Coughlin insists this will boost Q2 sales and reduce discounting.

The Valuation Case: 6.1x P/E Isn't Just Cheap—It's a Deal

At today's price, PVH trades at 6.1x forward earnings, well below its five-year average of 9.5x. Analysts see a $106 price target (a 24% upside), but the real story is the margin rebound. If PVH can stabilize margins at 8.5% in 2025 and improve from there, this P/E could snap back to 10x or higher.

The Risks—and Why They're Overblown

Bearish traders are fixated on the $1.05 tariff drag and Q2 EPS guidance cuts. But tariffs are a known cost, and PVH is already passing them on to customers. The bigger threat? A recession. Yet PVH's focus on premium basics (like Calvin Klein's $75 jeans) has recession-proof appeal—they're splurge-worthy but not luxury.

Action Alert: Buy the Dip—But Wait for Q2 Proof

The stock is down 7% year-to-date, but this is a setup for a H2 rally. If Q2 sales beat low expectations and inventory normalizes, the 8.5% margin target could hold—triggering a P/E expansion.

Buy now for the long game?
- Bull Case (2025): Margins stabilize, stock climbs to $100 by year-end.
- Bear Case (2026): Tariffs worsen, shares slip to $60—but at 6.1x P/E, this is a buy signal.

Bottom Line: PVH isn't a turnaround story—it's a rebound play. With brands firing on all cylinders and a valuation that screams “bargain,” this is a stock to own for the next 12–18 months. The near-term pain is priced in. The question isn't “Will margins recover?”—it's “How high will the stock go when they do?”

Trade Idea: Accumulate PVH on dips below $60. Set a stop at $55. Target $90 by end-2025.

Disclosure: The author holds no position in PVH at the time of writing.