PVH Holdings (NASDAQ: PVH) Stock is Value Hunter’s Dream

Shares of PVH Corp NYSE: PVH has started to retreat on its Q1 2020 earnings miss and rising fears of a second wave of COVID-19 stifling demand for its popular Calvin Klein, IZOD, Geoffrey Beane, Heritage and Tommy Hilfiger brands. The restart narrative is underway with the majority of global regions phasing in business and social re-openings as isolation mandates get lifted. PVH shares have mirrored the activity of the S&P 500 index NYSEARCA: SPY until the recent earnings disappointment. However, prudent and risk-tolerant investors looking for longer-term value may want to reevaluate the prospects for this iconic Company that has been in operations for nearly 140 years. The continued selling pressure is setting up potentially bountiful opportunistic pullbacks levels best suited for scaling into a position with a longer-term horizon as the restart narrative moves forward.  

Q1 Fiscal 2020 Earnings Reaction

PVH reported its Q1 Fiscal Year 2020 earnings report for the quarter ending in April 2020 on June 11, 2020. This was the peak of the COVID-19 pandemic. The Company reported non-GAAP earnings of (-$3.03) per share versus (-$1.60) per share consensus analyst estimates, a (-$1.43) per share earnings miss. Most of the Company stores were closed an average of six-weeks globally causing a (-50%) to (-65%) drop in retail store revenues and (-41%) drop in wholesale revenues. The Company expects an addition (-$100 million) of inventory write-downs. Furthermore, the Company expects Q2 2020 global topline down (-25%) according to quarter-to-date. In fact, the Company expects the damage to be even more dramatic than Q1 2020 and can’t give further guidance. This set the tone for the rest of the conference call. However, the question of whether they were purposely low-balling Q2 2020 has to be considered by prudent investors.

Non-Cash Pre-Tax Impairment Charges

Keep in mind over 70% of the non-GAAP earnings miss included (-$962 million) of pre-tax non-cash impairment charges, primarily related to goodwill. These are non-cash and non-operational write-downs occurring annually related to acquisitions. For the most part, as long as they don’t jeopardize loan covenants, the material effect is minimal. This is especially important in period of market anomalies like market depressions and apparently pandemics. This is a temporary valuation adjustment with a silver lining if it occurs near a “bottom” worst-case scenario. The rebound has begun and PVH has a proven template starting with China.

China Recovery Template

China is a re-open template seeing the fastest recovery with all store in China open and operating with week-to-week improvements. Re-opened stores are flat to last year with Tommy and Calvin digital sales up triple digits. European recovery trends are only one-quarter behind China and North America is one-quarter behind Europe. As of the earnings conference call, 85% of international stores have re-opened. The wholesale business pre-COVID 19 was mid-teens and are now only down to low to mid-teens as the restart gets underway.

North American Recovery

PVH expects 85% of its North American stores re-opened by July 2020. Digital platforms are strong Calvin Klein up over 40% and Tommy Hilfiger up 60% in Q1 and triple-digit improvement in the second quarter-to-date YoY. Calvin e-commerce saw a quarterly profit for the first time in CK.com history. Sales through Amazon NASDAQ: AMZN and various global top e-commerce sites have helped bolster revenues. The kryptonite would be a devastating second wave of COVID-19 so dramatic that stay-at-home mandates are reinstituted as regions shutdown again. The odds may be slim, but it is a possibility that investors should be aware of.

PVH Trajectories and Pullbacks

Using the rifle charts on a monthly, weekly, and daily time frame provides a broader view of the landscape for PVH stock. The monthly rifle chart triggered a market structure low (MSL) above $56.69 as it spikes up through the $69.06 Fibonacci (fib) level. The looming danger of the bearish monthly mini inverse pup lurks when shares fall below the 5-period moving average (MA) at $50.68. The weekly rifle chart has been in a bullish mini pup off the $40.26 weekly MSL trigger but slipping under the 5-period MA at $49.77 neutralized the upward surge. The daily rifle chart peaked on the Q1 2020 earnings run-up to form a market structure high trigger under $61.81 causing a full stochastic oscillation down to the 20-band. The bullish case is a bottoming off the $43.83 weekly 15-pd MA and double fib to cross up the daily stochastic and reawaken the weekly mini pup through its 5-period MA and monthly 5-period MA towards a re-test of the $56.70 break for a tightening to the monthly 15-period MA at the $73.29 fib. The bearish cash is a continued sell-off towards the daily lower BBs at the $36.32 fib to cross down the weekly stochastic to align with the monthly mini inverse pup. The opportunistic pullback entry levels are at the $47.86 fib, $43.83 fib, $40.26 weekly MSL trigger gatekeeper fib and $38.17 double fib. Management appears to have set the bar low for their Q2 2020 earnings report. Risk tolerant investors may consider scaling in lightly on the opportunistic pullback levels in a pyramid sizing allocation. Traders can play the coils off each fib retracement and extension. Peers like Ralph Lauren NYSE: RL and G-III Apparel Group NYSE: GIII share similar technicals.