NEW YORK (Real Money) -- Sixteen months ago, PVH Corp. (PVH - Get Report) paid $2.9 billion for Warnaco, a poorly run apparel company that happened to own the rights to some of the best parts of the Calvin Klein empire. The acquisition looked to be a total no-brainer because it allowed PVH to reunite all of the Calvin Klein branded products globally, giving the company excellent footholds in Asia and Brazil, as well as a struggling European business.
The stock of PVH then spiked to $116 from $91 on the news. Why not? The last time PVH, run by CEO Manny Chirico, had made a major acquisition it scored huge with Tommy Hilfiger. This seemed like the son of Hilfiger.
For a while, it looked to be working as PVH integrated the different parts of the Calvin Klein business within the fold. The stock had its ups and downs but ultimately it trended higher rather than lower. The bet looked like a good one. The Street has always liked Manny; he has been, along with Eric Wiseman, CEO of V.F. Corp. (VFC), about the most bankable exec in the industry, something I write about in Get Rich Carefully.
But late last year PVH missed the quarter -- an almost unthinkable event -- and acknowledged that the integration and product lines of Calvin Klein, particularly the jeans lines, weren't up to snuff and that the management teams inherited by PVH just weren't good enough.Manny was abject about the miss but promised it would be taken care of and by the second half of 2014, things would indeed be back on track. To me, last night's quarter showed that the problems from the Calvin Klein/Warnaco acquisition are now behind the company. Sure, Manny said the colder weather hasn't produced such good results lately, so this isn't one of those situations where I expect a straight-up move. That said, it seems totally doable that PVH can earn close to $8 this year and I don't see how this long-term, double-digit grower doesn't deserve at least some premium to the average stock in the S&P 500. But let's say you are suspicious because of the miss last year. If you give it a market multiple on that $8 in earnings power, you get slightly less than $140. And if you trust Manny, like I do, when he said he saw $10 in earnings power in the cards, then that target could be too low. In other words, the turn is in. What's amazing to me in terms of the irony of all of this was when the company reported last night that its stock stood at $116, giving up everything it had made on the acquisition except the initial pop. It was a total rollback to where the market judged PVH deserved to be at that moment. So let me ask you: Do you think that PVH has delivered no value to shareholders since the acquisition? I don't think so. Which is why I think the stock is a buy. Action Alerts PLUS, which Cramer co-manages as a charitable trust, has no positions in the stocks mentioned. Editor's Note: This article was originally published at 7:55 a.m. EDT on Real Money on March 26.