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Why PVH Corp's Q1 2025 Earnings Signal a Turnaround – Buy Before the Re-Rating

Marcus LeeTuesday, May 20, 2025 12:37 am ET

10min read

The June 5 earnings call for PVH Corp (NYSE: PVH) could mark a pivotal moment for investors seeking exposure to a fashion giant primed for a valuation rebound. With record margins, brand momentum in high-growth markets, and a shareholder-friendly capital strategy, PVH is positioned to deliver a catalyst-driven re-rating. Here’s why now is the time to buy.

Margin Resilience: A Testament to Operational Discipline

PVH’s Q1 2024 results already hinted at a turning point, with gross margins hitting 59.4%, a record high for the company. This outperformance, driven by cost optimization under the PVH+ Plan, sets a strong baseline for Q1 2025. The strategy’s focus on supply chain efficiency and brand portfolio streamlining has reduced reliance on lower-margin wholesale channels, while direct-to-consumer (DTC) sales now account for 55% of revenue.

The company’s Q4 2024 non-GAAP operating margin of 10.0%, despite macroeconomic headwinds, underscores its ability to protect profitability. Analysts anticipate this margin stability to persist in 2025, with inventory management—a key risk in prior years—now under control. Inventory grew just 6% YoY in Q4, reflecting strategic stock investments rather than excess.

Brand Momentum: Calvin Klein and Tommy Hilfiger Lead in Growth Markets

PVH’s two flagship brands are executing flawlessly in regions critical to future growth:
- Calvin Klein: North America revenue grew 3% in 2024 due to strong retail demand and timed wholesale shipments. In APAC, the brand achieved its third straight year of constant-currency growth, fueled by digital expansion and luxury positioning.
- Tommy Hilfiger: Despite a 7% decline in Europe (currency-adjusted 4%), the brand’s strategic shift to quality over quantity is bearing fruit. In EMEA, DTC sales rose 12%, signaling a successful pivot to premium retail.

The $500M+ shareholder returns in 2024, including accelerated buybacks, reflect confidence in this trajectory. With $1.8B remaining under its $5B authorization, PVH is aggressively capitalizing on its undervalued stock.

Undervalued at 7.34x P/E – A Contrarian Opportunity

PVH’s current P/E ratio of 7.34x (as of May 19, 2025) is a stark contrast to its historical average of 18.25x, and well below peer averages like Ralph Lauren’s 23.33x and VF Corp’s 25.93x. This discount persists despite:
- Strong EPS growth: TTM diluted EPS of $10.56 (vs. $77.71 stock price).
- Debt stability: Net leverage of 2.1x, safely within targets.

The gap widens when considering forward P/E of 8.02x, which already prices in 2025’s modest revenue expectations. At these levels, even a partial reversion to historical multiples would unlock 50-60% upside.

Risk Mitigation: DTC and Digital Strength

PVH’s direct-to-consumer model acts as a shield against macro risks. DTC margins are 10-15% higher than wholesale, and digital sales now account for 40% of total revenue—a trend accelerating in APAC and EMEA. Meanwhile, foreign exchange headwinds are being offset by pricing power and hedging strategies.

The June 5 call will likely affirm these strengths. Management has already guided for flat-to-2% revenue growth in Q1 2025, but the real story will be margin expansion and brand-specific metrics like Tommy Hilfiger’s EMEA DTC performance.

Conclusion: A Buy at 7.34x – The Re-Rating is Coming

PVH’s Q1 2025 results will validate its sustainable growth playbook: disciplined margin management, brand-led expansion in high-growth regions, and shareholder-friendly capital allocation. With a P/E 66% below its 10-year average and peers trading at twice its multiple, this is a rare chance to buy a blue-chip fashion stock at a deep discount.

Investors should act now: Catalysts like the earnings call and potential upward revisions to 2025 guidance could spark a re-rating that leaves latecomers scrambling.

Recommendation: Buy PVH ahead of the June 5 call.

Disclosure: The analysis is based on publicly available data and does not constitute personalized financial advice.

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