PVH Corp.’s investors took the company to task for a sales outlook weakened by the war in Iran and an earnings forecast propped up by $100 million in tariffs.
Shares of the Tommy Hilfiger and Calvin Klein parent company dropped 22.3 percent to $76.12 in midday trading Thursday, leaving the company with a market capitalization of $3.5 billion.
Late Wednesday, PVH warned its revenues for the year would be down slightly on a constant currency basis, instead of flat to slightly up.
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Stefan Larsson, chief executive officer, described it as fallout from the war in Iran, which has directly impacted its business in the Middle East and had a knock-on effect in Turkey, while higher fuel prices were hitting Europeans.
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The timing is particularly bad for PVH.
Larsson told analysts on a conference call on Thursday that his PVH+ strategic plan is starting to scale across the business, gaining traction with fresh marketing and innovation. Particular progress has been made in denim and underwear at Calvin Klein and sweaters and outerwear at Tommy Hilfiger, he said.
“We are leaning into the strength we have built over the past few years with the Gen Z and young Millennial consumers. So we are really leaning into the power segment,” he said.
Tommy Hilfiger’s sales slipped 2 percent in constant currencies during the quarter, while Calvin Klein was off 2.9 percent.
But underlying that performance is “significant strength” in e-commerce traffic, pushing the channel to midsingle-digit increases for both brands, Larsson said.
“It’s one of the quarters where we put the most [PVH+] proof points on the board,” the CEO said.
“What’s changed since last quarter? The only thing that has changed, which is the European outlook, [based on] the prolonged effect of the war,” he said. “We didn’t have that last quarter.”
PVH’s quarter ended May 3, putting more of the war’s impact into its results than many of its competitors, which have fiscal quarters that ended in late April.
New worries about Iran, however, did not spread to other stocks in the market. Instead investors and analysts were zeroing in on the specifics at PVH.
Simeon Siegel, an analyst at Guggenheim who has a neutral rating on PVH, wrote in a note to clients that, “How you get there matters.”
Siegel said the company’s management “suggested that pressures from a prolonged conflict in the Middle East and related macro pressures were negatively impacting the fiscal-year revenue outlook, and although they were maintaining their prior EBIT margin guide, this was boosted by approximately $100 million in tariff refunds.”
The “underlying fundamentals” have weakened, he said.