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PVH Corp Closes Stores in China Due to Coronavirus Outbreak

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The outbreak of coronavirus in China has given rise to a tough situation for companies operating in the region. Leading Textile – Apparel retailer PVH Corp. (PVH - Free Report) is among the companies that expect the current situation in China to have a material impact on its results. Yesterday, PVH Corp announced that it has temporarily closed majority of the Tommy Hilfiger and Calvin Klein stores (company-operated and franchise) in China in response to the coronavirus outbreak.

Other companies that recently closed stores due to coronavirus outburst are V.F. Corp (VFC - Free Report) , NIKE (NKE - Free Report) and Capri Holdings (CPRI - Free Report) . NIKE has temporarily closed nearly half of company-owned stores in Greater China, while V.F. Corp closed about 60% of its owned and partnered stores in China. Moreover, Capri Holdings has closed roughly 150 out of 225 stores in mainland China as of Feb 5, 2020.

Coming back to PVH Corp, it noted that open stores are operating with reduced hours and witnessing lower-than-expected traffic and sales trends. Given the epidemic outbreak in the country, PVH Corp is prioritizing on health and safety of employees and its partners. Consequently, it expects the affected China operations to have a pronounced impact on overall results.

Notably, the company expects Greater China to contribute nearly 7% of its revenues in 2019 while the Asia Pacific region is likely to make for 16% of its revenues. Furthermore, the company notes that the outbreak is likely to result in sourcing difficulties as about 20% of its global sourcing is derived from China. This includes nearly 10% of sourcing inbound to the United States.

The company now expects fourth-quarter and fiscal 2019 earnings per share on a GAAP basis to be lower than its previous guidance. This could be due to actuarial loss recognized on retirement plans, resulting from a decline in discount rate in the latter part of January 2020. Earlier, the company envisioned loss per share of about 20 cents for the fourth quarter and around $6.32 for fiscal 2019, on a GAAP basis.

Adjusted earnings are envisioned to be a minimum of $1.79 and $9.45, respectively, for the fourth quarter and fiscal 2019. The company believes that non-GAAP earnings would have been higher than its provided guidance had the coronavirus outbreak not happened during the last two weeks of its fiscal year.

We note that, shares of this Zacks Rank #4 (Sell) company have decreased 8.1% in the past three months against the industry’s growth of 2.2%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Nevertheless, the company is on track with its long-term growth opportunities across Asia Pacific region. It is well-positioned to manage coronavirus outbreak driven by diversified, global business model and the strength of iconic brands.

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