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Consider Betting on PVH Corp Despite a Tough Environment

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PVH Corp (PVH - Free Report) looks promising courtesy of its strategic initiatives including efficient brand management, solid marketing strategies and enhancement of its e-commerce operations. Moreover, the company’s efforts to keep pace with the evolving consumer trends and healthy cash flows bode well.

Notably, PVH Corp has been putting up a robust financial show, with 17th consecutive earnings beat and eighth straight positive sales surprise in second-quarter fiscal 2018. Solid first-half fiscal 2018 numbers prompted management to issue a bullish outlook for the fiscal third quarter and raise earnings view for fiscal 2018. Let’s delve deep.

Solid Brand Portfolio & E-commerce Initiatives

PVH Corp has been benefiting from its iconic Calvin Klein and Tommy Hilfiger brands, particularly in international regions. In the fiscal second quarter, revenues at Calvin Klein advanced 18% and 16% in constant currency. The segment’s International sales grew 16% and 13% on a constant-currency basis. The segment’s growth was driven by strength in Europe and Asia, comparable store sales (comps) growth, higher sales at North America backed by an impressive wholesale performance.

Revenues at Tommy Hilfiger brand improved 15% and 13% in constant currency. Its International revenues were up 20% and 16% in constant currency. This improvement can be attributed to stellar performance in all regions and channels, comps growth, and solid growth in wholesale business.

As the company’s Heritage Brands segment is sluggish, PVH Corp has been taking steps to revive performance at this division by expanding its reach and distribution, including the brand’s e-commerce presence. Apparently, management announced the launch of IZOD brand in Europe, spreading across Spain, Germany, the Netherlands and Scandinavia in fall this year. Moving ahead, it plans to expand its distribution in Europe, Russia and the Middle East regions in spring next year. Earlier, the company launched an integrated e-commerce site, allowing cross-brand shopping for Heritage Brands.

In a recent move, PVH Corp also announced that Wirecard — a global digital financial services provider — rolled out the ‘Try Before You Buy’ payment choice in collaboration with PVH’s European headquarters. With this, the European Tommy Hilfiger and Calvin Klein websites became the first sites to use this versatile, smart payment option. This scheme enables online customers to pay 30 days after the delivery of their ordered products, making it convenient to try styles and other attributes. Notably, these shoppers have to make payment only for those products which they retain.

Expansion of these e-commerce portals reflects the company’s commitment to expand online presence, providing a boost to sales and profitability.

Some other players, which are significantly benefiting from solid omni-channel capabilities, including e-commerce, are Nordstrom, Inc. (JWN - Free Report) , American Eagle Outfitters, Inc. (AEO - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .

Robust Q2 & Outlook

PVH Corp reported solid results in second-quarter fiscal 2018, wherein earnings and sales outpaced estimates and improved year over year. Results exceeded the company’s expectations as well. This outperformance can be primarily attributed to a consistent momentum witnessed at the company’s Calvin Klein and Tommy Hilfiger brands along with gains from foreign currency.

For fiscal 2018, the company projects sales to increase 7% while constant-currency revenues are expected to grow 6% in comparison with fiscal 2017. Brand-wise, sales are anticipated to increase roughly 8% on both reported and currency-neutral basis at Calvin Klein, and 9% (or 8% on a currency-neutral basis) at Tommy Hilfiger. At Heritage Brands, the company expects sales to grow roughly 1% year over year. Adjusted earnings per share are envisioned to be $9.20-$9.25, up from $9.05-$9.15 guided earlier and $7.94 reported in fiscal 2017.

For third-quarter fiscal 2018, PVH Corp envisions total sales to increase nearly 7% year over year while it is anticipated to advance 9% on a constant-currency basis. Brand-wise, sales are expected to grow 5% (or 7% on a currency-neutral basis) at Calvin Klein, 10% (or 12% on a currency-neutral basis) at Tommy Hilfiger and 8% at Heritage Brands. Adjusted earnings per share are expected to be $3.10-$3.13, up from $3.02 in the year-ago quarter.

Bottom Line

All these aforementioned initiatives coupled with solid outlook for fiscal 2018 position PVH Corp well for future growth.

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