PVH Corp. (NYSE:PVH) was downgraded to 'Underperform' from 'Neutral' by Bank of America, which also lowered its price objective to $70 from $90, citing the apparel company's significant exposure to Europe, the Middle East and Africa (EMEA) and expectations that a recovery in the region could take longer than anticipated.
Shares of PVH traded hands at $72 on Thursday afternoon, up about 7% so far this year.
Bank of America analysts wrote that PVH's EMEA business accounts for about 50% of sales, the highest exposure among companies in their coverage universe, limiting the potential for upside amid a challenging macroeconomic backdrop.
The analysts lowered their earnings estimates for 2026 through 2028 by 1% to 3% to reflect softer sales and margin assumptions and reduced their valuation multiple to 4 times projected 2027 EV/EBITDA from 5 times previously.
Bank of America wrote that demand in Europe has weakened amid conflict in the Middle East, while PVH is also facing sales and margin pressure in its Middle East and Türkiye operations. Although the Middle East excluding Türkiye represents only about 1% of company sales, it contributes roughly 7% of total EBIT because the business is entirely wholesale.
Even if geopolitical tensions ease, the analysts wrote that a recovery in the region may take time, particularly as tourism flows into markets such as the United Arab Emirates have been affected. They added that PVH's wholesale business, which accounts for approximately half of total sales, could further slow the rebound because wholesale partners tend to be cautious about inventory commitments during periods of uncertainty.
Bank of America also noted that PVH's updated guidance already incorporates expected tariff refunds of about $100 million in the second quarter, equivalent to an estimated 100-basis-point benefit to annual gross margin. The analysts wrote that this leaves the company with less margin flexibility in 2026 relative to peers and creates more challenging comparisons in 2027.
Despite the tariff-related benefit, Bank of America expects PVH's EBIT margin to remain flat in 2026 as pressure in EMEA, tariff costs, licensing transitions and increased marketing spending offset potential gains.
While the analysts acknowledged longer-term opportunities for margin expansion through cost-cutting and strategic initiatives, they wrote that near-term profit-and-loss volatility is likely to continue overshadowing progress.