PVH Corp. (PVH) shareholders are paying the price for a disappointing earnings call that has provoked analysts to pare down their price targets for the apparel giant.
Shares of the fashion leader that serves as parent to Van Heusen, Tommy Hilfiger, Calvin Klein, Izod and others were down around 4% before Friday's opening bell -- and had been down nearly 8% -- after it posted results for its fiscal third quarter, which ended Nov. 4. The market's reaction reflected missed forecasts on sales at the underlying brands and contracting margins.
Calvin Klein was a particular disappointment, missing sales estimates by 300 basis points as the brand's margin contracted 34 basis points. Jeans sales were largely to blame.
"We're disappointed [with] operating margins in the business as they have been negatively impacted mainly by two issues," CEO Manny Chirico said on Thursday night's Mad Money with Jim Cramer. "We've gone, from a fashion point of view and an elevation point of view, too far, too fast."
The CEO said prices will need to be adjusted heading into the spring selling season, but defended the strength of his Calvin Klein brand overall aside from pricing problems with jeans specifically.
The problems at Calvin Klein cast a pall on the company's positive print, as its earnings hit $3.21 a share and convincingly beating the analyst consensus of $3.14. PVH also raised guidance into the fiscal fourth quarter.
The contracting margin is viewed as a problem that potentially could intensify based on tariff concerns and foreign exchange headwinds ahead.
Chirico estimated there would be about a $70 million impact on his company from tariffs. Without time to adjust to the tariffs, Chirico said the increased cost would be passed on to the consumer.
"The unfortunate thing about this is, who's going to be hurt be hurt by [tariffs]? The consumer." Chirico told Cramer. "We have to raise prices."
The need to pass on higher costs to the consumer concerned several analysts.
"We expect sentiment to remain negative with continued CK struggles as well as looming threats from FX and tariffs overshadowing tonight's beat and raise," Deutsche Bank analyst Tiffany Kanaga wrote.
Kanaga joined in on a trend among analysts that is all the rage when it comes to PVH -- namely, cutting their price targets.
"Our price target is now $157, from $171 [per share]," Kanaga wrote. "We have reduced our target multiple by a turn and a half to reflect what has become a trend of disappointing CK results."
According to FactSet, six analysts covering the stock pulled back on their price targets after the earnings release.
Credit Suisse analyst Michael Binetti wrote on Friday that in looking ahead to 2019, "we continue to have concerns around macroeconomic volatility and near-term CK trends."
"We don't think key leading revenue indicators have changed for either Calvin Klein or Tommy," Binetti said. "All that said, amid ongoing macro volatility, we're lowering our 2019 revenue growth outlook."
Binetti reduced his PVH price target from $150 per share to $125, bringing his estimate to multiples he termed as near "eye-watering lows."
An earnings call is scheduled for 9:00 a.m. on Friday, wherein Chirico will try to convince analysts that their trimming is out of style and a higher multiple is appropriate.