We recently compiled a list of the Top 10 Luxury Stocks According to Analysts. In this article, we are going to take a look at where PVH Corp. (NYSE:PVH) stands against the other luxury stocks.
The luxury retail industry is facing significant challenges, with major brands like Burberry, Hugo Boss, and Gucci experiencing substantial drops in their profits. The decline in luxury sales, especially in Asia and the Americas, has been a major concern, with Burberry and Hugo Boss seeing notable decreases in their revenue. Other brands such as Richemont and Swatch have also reported significant downturns in sales, particularly in China. The overall luxury market index has seen a sharp decline, which indicates widespread struggles in the sector.
Luxury brands have traditionally relied heavily on Chinese consumers, who have contributed significantly to their growth. However, the slowing Chinese economy and a cautious consumer base have led to reduced spending on luxury goods. The economic slowdown in China is attributed to factors such as lower land sales, an aging population, and decreased exports.
Despite the challenges, some brands made significant strides such as the Italian high fashion women’s clothing and accessory brand, Miu Miu, which saw a nearly 60% growth last year and a 90% growth in the first quarter of this year. This helped its parent company, Prada Group, increase its sales as well.
The luxury market has historically bounced back from downturns, and many in the industry hope that the current challenges are temporary. However, the recent performance has reminded the sector that luxury items are not immune to economic challenges, and consumer demand can fluctuate based on economic conditions and consumer confidence. Nevertheless, luxury brands are comparatively less affected by the economic conditions as most of their purchases are made by a very small group of elite consumers. You can also read our article on Top 11 Luxury Clothing Stocks to Invest in Now, where we discussed luxury consumer behavior in detail.
Our Methodology
For this article, we made a list of nearly 20 luxury stocks with at least Moderate Buy ratings according to analysts and narrowed our list to 10 stocks with the highest average analyst price target, as of August 5. We also added the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds as of Q1 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer trying on a sports jacket in-store, showcasing the company’s sportswear range.
PVH Corp. (NYSE:PVH)
Average Price Target Upside as of August 5: 55.74%
Number of Hedge Fund Holders: 39
PVH Corp. (NYSE:PVH) is a New York-based apparel company and one of the top luxury stocks according to analysts. The company is engaged in designing and marketing a wide range of products, including dress shirts, neckwear, sportswear, swimwear, handbags, footwear, and more.
Its primary brands are luxury brands, Calvin Klein and Tommy Hilfiger. The company operates through Tommy Hilfiger North America, Tommy Hilfiger International, Calvin Klein North America, Calvin Klein International, and Heritage Brands Wholesale segments. The company’s products reach consumers through various channels, including department stores, chain outlets, and specialty shops, among others.
PVH (NYSE:PVH) has a Buy rating as per the coverage of 18 analysts. The average price target of $144.00 has an upside of 55.74% to the stock’s current price, as of August 5.
PVH (NYSE:PVH) reported earnings per share of $2.45 for the first quarter, which surpassed expectations by $0.26. It was driven by strong performances in key markets with a focus on higher-margin opportunities. Additionally, in North America, the company’s revenue jumped 3%, fueled by growth in direct-to-consumer and wholesale sales. Both Calvin Klein and Tommy Hilfiger segments experienced a 3% rise in revenue because of higher average orders and better conversion rates, along with reduced promotions.
In Asia Pacific, PVH (NYSE:PVH) achieved 3% revenue growth, led by strong direct-to-consumer sales, particularly in China. Despite economic challenges in Europe, the company navigated them by scaling back in low-margin segments and digital marketplaces to preserve sales quality and profit margins.
PVH’s (NYSE:PVH) inventory management was effective as it successfully reduced inventory by 22% year-over-year to $1.35 billion, minimizing excess stock and the need for heavy discounts. The company reported that clearance sales were cut by nearly 50%, which indicates the availability of fresher products and improved use of working capital.
Moreover, under the PVH+ Plan, PVH (NYSE:PVH) prioritizes enhancing shareholder value. The company repurchased $200 million worth of shares in Q1 and plans on further buybacks totaling $400 million for the year. In conclusion, despite economic fluctuations, PVH (NYSE:PVH) is focused on improving sales quality, efficient inventory management, and delivering value to shareholders.
In Q1, 39 hedge funds held stakes in PVH (NYSE:PVH), with positions worth $1.36 billion. As of the first quarter, Pzena Investment Management is the most significant shareholder in the company and has a stake worth $750.778 million.
FPA Queens Road Small Cap Value Fund stated the following regarding PVH Corp. (NYSE:PVH) in its first quarter 2024 investor letter:
“PVH Corp. (NYSE:PVH) is an apparel company that owns the Tommy Hilfiger and Calvin Klein brands globally. Most of PVH’s earnings come from Europe, where the Tommy and Calvin brands are considered “almost luxury” and PVH has generally recorded high single-digit organic growth with demonstrated pricing power during the preceding decade. CEO Stefan Larsson has done an excellent job revitalizing the company and improving margins at PVH’s moribund U.S. operations. Over the past year, PVH and our other apparel companies have performed well as the worst fears for consumer spending didn’t play out. PVH has become a top five holding for us and our apparel holdings (PVH, GIII, LEVI and DECK) now make up almost 10% of the portfolio. On April 2, post quarter end, PVH announced fiscal 23Q4 results where they missed on earnings guidance for the coming year. The stock is down ~20% from its high but now trades at less than ten times forward earnings. We have held our position.”
Overall PVH ranks 3rd on our list of the best luxury stocks to buy. You can visit Top 10 Luxury Stocks According to Analysts to see the other luxury stocks that are on hedge funds’ radar. While we acknowledge the potential of PVH as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PVH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.