PVH Corp's Revenue Dips Amid Tough European Demand

PVH Corp (NYSE: PVH), the powerhouse behind fashion giants Calvin Klein and Tommy Hilfiger, is facing a rough patch. Before the market opened on Tuesday, its stock price plummeted nearly 23%. This drop came after the company predicted its annual revenue and earnings would fall more than expected, especially due to challenges in Europe.

Analysts had anticipated a smaller decrease in revenue, around 2.3%, but PVH set the bar lower, expecting a 6% to 7% drop. This forecast includes the effects from selling off its women's intimates section. John Kernan, an analyst at TD Cowen, expressed disappointment, especially after the company's optimistic tone post-third-quarter results.

The decline is partly due to a 10% fall in wholesale revenue in the last quarter. Retailers in North America and Europe are buying less, driven by cautious spending from consumers. PVH's CEO, Stefan Larsson, mentioned a strategic shift towards ensuring sales quality in Europe—a region that generates nearly half of the company's sales.

The fashion industry, including brands like Levi Strauss and Ralph Lauren, is grappling with a decrease in orders from department stores. For PVH, this means their operating margin remains stagnant, with expected earnings per share between $10.75 and $11.00—below the analysts' forecast of $11.89.

Despite these challenges, PVH managed to exceed quarterly sales and profit expectations, thanks to strong holiday demand and smart inventory management. However, when compared to its peers, PVH's stock valuation appears more modest, with a forward price-to-earnings ratio significantly lower than Ralph Lauren and Lululemon. Ralph Lauren's shares also dipped in premarket trading, indicating a broader trend of caution in the fashion retail sector.