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PVH Corp. (PVH) Down 11.2% YTD: Can Online Sales Aid Revival?

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Shares of PVH Corp. (PVH - Free Report) have not only declined but also underperformed the industry year to date. Notably, this currently Zacks Rank #3 (Hold) stock has shed 11.2% value against the industry’s growth of 5.3%. Its dismal run on the bourses can be attributed to its third-quarter fiscal 2020 results wherein both the top and the bottom line fell year over year. Results were hurt by continued adverse impacts of COVID-19 and the resurgence of COVID-19 infections, inducing temporary store closures in some parts of Europe and decreasing store traffic in North America.

Also, sluggishness in Tommy Hilfiger, Calvin Klein and Heritage Brands businesses weighed on the top line. Further, wholesale revenues plunged 22% in the fiscal third quarter due to recent bankruptcies of several customers and a discouraging performance in North America. Management projects pandemic woes to hurt its fourth-quarter revenues and earnings due to the spike in coronavirus cases across Europe and North America. In this regard, fourth-quarter revenues are expected to be down nearly 20% year over year.

Additionally, the company is on track to streamline the North American business by exiting its Heritage Brands Retail unit. This will result in 162 store closures within mid-2021, thereby lowering headcount by 12% across all three brands, namely Calvin Klein, Tommy Hilfiger and Heritage Brands. This move comes after the unit failed to get back on the growth trajectory, mostly due to consumers changing preferences in light of the COVID-19 situation.

Nevertheless, management is looking into every nook and cranny to fuel growth. PVH Corp, in particular, remains optimistic about the underlying power of Calvin Klein and Tommy Hilfiger brands, which strengthens the company’s business to succeed amid the current challenging environment.

Moreover, the company is steadily witnessing an impressive performance in its digital arm as its global store fleet remained shut amid the COVID-19 pandemic-imposed lockdown while customers shifted to online purchases. E-commerce sales surged 36% year over year during third-quarter fiscal 2020, driven by strong online sales growth in all regions, despite the reopening of stores. Also, it witnessed digital sales growth across all regions, aided by solid online demand, precisely for essential items and casualwear. Encouragingly, the company is on course with the expansion of its digital services.

Courtesy of such concerted efforts and an overwhelming customer response, the company’s holiday season sale including Singles’ Day in Asia as well as Black Friday in North America and Europe is said to have fared well. Moving ahead, management had earlier envisioned the company’s online sales to represent 20% of its total sales over the next few years.

Bottom Line

Although uncertainties prevail due to the pandemic effects, we believe that the intensified focus on e-commerce and sturdy demand are likely to revive the stock’s flagging fortunes. In fact, the Zacks Consensus Estimate for fiscal 2021 earnings is pegged at $6.56 per share, indicating a rise of 18.2% in the past 30 days. These positives raise investors’ optimism on the stock.

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