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PVH: Too Much Debt And Declining Sales

May 01, 2020 6:30 AM ETPVH Corp. (PVH) Stock
Ishwarya Prasanna profile picture
Ishwarya Prasanna


  • PVH Corp.'s debt-to-EBITDA ratio is at 3, almost triple that of its competitors.
  • The men's business could be a highlight in the business, as it is more price competitive and has the brand asset behind it.
  • It is a premium retailer with a financially challenged consumer.

Investment Thesis

PVH (NYSE:PVH) could be an undervalued company in this crisis. However, severe declines in North America sales before COVID-19 could indicate an inherent weakness in the business. Additionally, the company is still selling clothes at a premium price, and with the established brand that it has, PVH has failed to innovate in terms of marketing and consumer appeal. Additionally, its debt-to-EBITDA ratio is at 3, which is almost double that of its competitors such as Gap (GPS) and V.F. Corp. (VFC), indicating PVH has too much debt in an age that now depends on cash. Also, its men’s business could be a bright spot in the business, as its more affordable price point could appeal to consumers. Lastly, the P/B ratio is below 1, indicating the stock is undervalued. However, with the wild fluctuations in stock price, it could be difficult to pinpoint a good price, as the company has lost and gained almost half of its stock price within a month.

Pandemic Effect

With the pandemic in full swing across the globe, it has put many legacy brands in jeopardy. And while PVH has been flying high internationally, it has been declining severely in North America. Throughout the last few years, the company has been relying severely on its brand name rather than innovating clothing-wise. As consumers have moved towards cheaper and more innovative brands, Calvin Klein, specifically, is unable to generate the same interest with a North America comp store sales decline of 2% and an international comp store sales decline of 1%. Especially with the rise of Aerie (AEO) in the women's intimate market, Calvin Klein's lucrative intimate business has come under more fire. And its new #MyCalvins campaign is not striking a chord with consumers either, as consumers have moved on to

This article was written by

Ishwarya Prasanna profile picture
Gen-Z Insights from a Gen-Zer. Retail, trends, and analysis. An overall comprehensive view of the companies that make up the retail industry to date. Luxury to discount.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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