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PVH Corp (PVH) Sells Speedo North America, Adds to Liquidity
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PVH Corp (PVH - Free Report) concluded its previously announced divestiture of Speedo North America business licenses to Pentland Group for $170 million in cash, after working capital adjustments. Notably, the Pentland Group is the parent company of Speedo International Limited, which licensed the Speedo trademark to a subsidiary of PVH Corp for perpetual use in North America and the Caribbean. Per the agreement, the subsidiary will be sold to the Pentland subsidiary.
The deal, which was signed in January 2020, supports PVH Corp’s efforts to streamline its Heritage Brands business to adapt to the changing retail environment.
The Pentland Group had acquired Speedo in 1991 and significantly contributed to make it the world’s major performance swimwear brand. With the aforesaid transaction, Pentland Group will reunite with the Speedo business globally, paving the way to fully capitalize on the brand’s potential.
PVH Corp notes that the proceeds from the sale transaction will further boost its balance sheet and liquidity position. The company currently has liquidity of more than $1.3 billion in cash and available borrowings. This provides ample liquidity in the current tough times when the world is fighting to contain the coronavirus pandemic.
In the wake of the coronavirus outbreak, PVH Corp is among the retailers that announced the closure of its company-operated retail stores across North America and Europe since Mar 17. On its fourth-quarter fiscal 2019 earnings call, the company stated that it expects the first quarter and fiscal 2020 results to include significant impacts from the coronavirus outbreak. Based on the uncertainties and the unprecedented impacts of the situation on its operations, PVH Corp has withheld its guidance for fiscal 2020.
The company stated that its operations in first-quarter fiscal 2020 will likely be impacted by virus-related concerns, reduced travel, temporary store closures and government-imposed restrictions. The actions have led to a significant reduction in traffic and consumer spending trend as well as a slowdown in sales at its retail stores in nearly all key markets. Additionally, the company’s wholesale customers and licensing partners are witnessing similar trends. Further, PVH Corp and its licensing partners are witnessing supply-chain disruptions, which are expected to mount up in the future due to the closure of factories or operations with a limited workforce.
However, the company is confident of navigating the situation on its strong financial position, with more than $1 billion in cash and available borrowings. It ended 2019 with cash of $503 million and a 7% decline in inventory levels.
Further, the company has undertaken a few steps to maintain financial flexibility during the current turbulent times. It has drawn $750 million from its more than $1-billion revolving credit facility to improve cash position, while also maintaining untapped capital through its credit facility. PVH Corp has also temporarily suspended its share repurchase program and dividend payouts, beginning the second quarter of fiscal 2020.
The company currently has $600 million remaining under its current share repurchase authorization, following repurchases worth $325 million in fiscal 2019 and $110 million in first-quarter fiscal 2020.
Moreover, PVH Corp is reviewing every opportunity to reduce discretionary operating expenses. It has also lowered its capital expenditure target to $190 million for fiscal 2020, whereas it incurred $345 million in fiscal 2019.
In the past three months, shares of this Zacks Rank #5 (Strong Sell) company have slumped 62.7% compared with the industry’s 41.6% decline.
Other companies that have withdrawn guidance in view of the uncertainty related to the COVID-19 outbreak are NIKE Inc. (NKE - Free Report) , lululemon athletic inc. (LULU - Free Report) and Skechers U.S.A. Inc. (SKX - Free Report) .
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PVH Corp (PVH) Sells Speedo North America, Adds to Liquidity
PVH Corp (PVH - Free Report) concluded its previously announced divestiture of Speedo North America business licenses to Pentland Group for $170 million in cash, after working capital adjustments. Notably, the Pentland Group is the parent company of Speedo International Limited, which licensed the Speedo trademark to a subsidiary of PVH Corp for perpetual use in North America and the Caribbean. Per the agreement, the subsidiary will be sold to the Pentland subsidiary.
The deal, which was signed in January 2020, supports PVH Corp’s efforts to streamline its Heritage Brands business to adapt to the changing retail environment.
The Pentland Group had acquired Speedo in 1991 and significantly contributed to make it the world’s major performance swimwear brand. With the aforesaid transaction, Pentland Group will reunite with the Speedo business globally, paving the way to fully capitalize on the brand’s potential.
PVH Corp notes that the proceeds from the sale transaction will further boost its balance sheet and liquidity position. The company currently has liquidity of more than $1.3 billion in cash and available borrowings. This provides ample liquidity in the current tough times when the world is fighting to contain the coronavirus pandemic.
In the wake of the coronavirus outbreak, PVH Corp is among the retailers that announced the closure of its company-operated retail stores across North America and Europe since Mar 17. On its fourth-quarter fiscal 2019 earnings call, the company stated that it expects the first quarter and fiscal 2020 results to include significant impacts from the coronavirus outbreak. Based on the uncertainties and the unprecedented impacts of the situation on its operations, PVH Corp has withheld its guidance for fiscal 2020.
The company stated that its operations in first-quarter fiscal 2020 will likely be impacted by virus-related concerns, reduced travel, temporary store closures and government-imposed restrictions. The actions have led to a significant reduction in traffic and consumer spending trend as well as a slowdown in sales at its retail stores in nearly all key markets. Additionally, the company’s wholesale customers and licensing partners are witnessing similar trends. Further, PVH Corp and its licensing partners are witnessing supply-chain disruptions, which are expected to mount up in the future due to the closure of factories or operations with a limited workforce.
However, the company is confident of navigating the situation on its strong financial position, with more than $1 billion in cash and available borrowings. It ended 2019 with cash of $503 million and a 7% decline in inventory levels.
Further, the company has undertaken a few steps to maintain financial flexibility during the current turbulent times. It has drawn $750 million from its more than $1-billion revolving credit facility to improve cash position, while also maintaining untapped capital through its credit facility. PVH Corp has also temporarily suspended its share repurchase program and dividend payouts, beginning the second quarter of fiscal 2020.
The company currently has $600 million remaining under its current share repurchase authorization, following repurchases worth $325 million in fiscal 2019 and $110 million in first-quarter fiscal 2020.
Moreover, PVH Corp is reviewing every opportunity to reduce discretionary operating expenses. It has also lowered its capital expenditure target to $190 million for fiscal 2020, whereas it incurred $345 million in fiscal 2019.
In the past three months, shares of this Zacks Rank #5 (Strong Sell) company have slumped 62.7% compared with the industry’s 41.6% decline.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other companies that have withdrawn guidance in view of the uncertainty related to the COVID-19 outbreak are NIKE Inc. (NKE - Free Report) , lululemon athletic inc. (LULU - Free Report) and Skechers U.S.A. Inc. (SKX - Free Report) .
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>