35% Gain Possible For PVH Corp Stock Post-Covid?

Comparing the trend in PVH Corp stock (NYSE: PVH) (formerly known as Phillips-Van Heusen Corporation, owns brands such as Van Heusen, Tommy Hilfiger, Calvin Klein, to name a few) over recent months with its trajectory during and after the Great Recession of 2008, we believe that the stock can potentially gain over 35% to levels of around $60, once fears surrounding the coronavirus outbreak are put to rest. PVH is struggling with supply chain disruptions and weaker demand for luxury goods in the current situation. To add to that, e-commerce sales contribute only 6% to total company revenues, which will likely not be able to mitigate the fall in its store traffic.

A detailed comparison of PVH performance vis-à-vis the S&P 500 is available in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did PVH Stock Fare Compared With S&P 500?

The World Health Organization declared a global health emergency at the end of January in light of the coronavirus spread. The rally in the equity market continued till February 19 with the S&P 500 reaching a record high, but the trend reversed sharply over the following weeks. PVH stock lost 66% of its value (vs. about 34% decline in the S&P 500) between February 19 and March 23. A bulk of the decline came after March 6th, when an increasing number of coronavirus cases outside China fueled concerns of a global economic slowdown. Notably, though, the multi-billion dollar stimulus package announced by the U.S. government has helped the stock price recover 52% over recent weeks (vs. about 32% gain in the S&P 500) to its current level of close to $44.

PVH Stock Fell Because The Situation On The Ground Has Changed

PVH has a higher exposure to China compared to other apparel retailers. Greater China accounts for about 7% of PVH’s revenue and about 20% of the company’s goods are derived from China. PVH had to temporarily close the majority of the Tommy Hilfiger and Calvin Klein stores (company-operated and franchise) in China to help contain the novel coronavirus outbreak. As the coronavirus cases began to grow outside China, PVH had to temporarily force shut its retail stores in North America and Europe, as well.

PVH has now begun to reopen its stores in a phased manner as additional localities lift restrictions on retail operations. Approximately 180 company-operated stores across all brands are now open in North America, along with 350 in Europe, and 1K in Asia. However, consumers under lockdown-style conditions could likely forego apparel and other discretionary consumer items and focus on buying necessities such as food and medicine.

We believe PVH’s upcoming Q1 June results will confirm this reality with a drop in its total revenues. If signs of coronavirus containment aren’t clear by its September Q2 earnings timeframe, it’s likely PVH’s stock is going to see a continued drop when results confirm palpable reality.

PVH Stock Fared Similarly During The 2008 Downturn

But PVH stock witnessed something similar during the 2008 downturn. PVH’s stock declined from levels of around $52 in October 2007 (the pre-crisis peak) to roughly $16 in March 2009 (as the markets bottomed out) - implying that the stock lost as much as 69% of its value from its approximate pre-crisis peak. This marked a much higher drop than the broader S&P, which fell by about 51%.

However, PVH’s stock recovered post the 2008 crisis, to levels of about $40 in early 2010, rising by 146% between March 2009 and January 2010. In comparison, the S&P bounced back by about 48% over the same period.

Will PVH’s Stock Recover Similarly From The Current Crisis?

It should be noted that PVH’s stock fell 66% from the market peak on February 19 to the low on March 23 compared to the 69% decline during the 2008 recession. Also, since it has recovered almost 51% over recent weeks - we believe it can potentially recover by another 35% to around $60 once economic conditions begin to show signs of improving. This marks a partial recovery back to around the $86 level PVH stock was at before the coronavirus outbreak gained global momentum.

We also compared the trend in TJX’s Stock over recent months with the 2008 crisis.

That said, the actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard forecasting US Covid-19 cases with cross-country comparisons lays the groundwork for expected recovery time-frame and spread.

Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture and complements our analyses of the coronavirus outbreak’s impact on a diverse set of PVH’s multinational peers including Kohl’s KSS , Macy’ Ms and Target TGT . The complete set of coronavirus impact and timing analyses is available here.

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