Premium specialty apparel retailer, PVH Corp. (PVH) stands to benefit from its diversified brand portfolio that provides it with higher possibilities of generating above-average industry growth compared with its peers and to sustain itself in the current challenging environment. The company’s approach to brand management allows each of its brands to develop further through rigorous marketing strategies, financial control and operating leverage. Based on the strength of many of its brands and opportunities with regard to distribution, we believe that the company is poised for long-term growth.
Moreover, we are positive on the company’s growth prospects, which concentrate on asset management, sustained focus on brand building, global expansion and effective implementation of business strategies.
In second-quarter fiscal 2014, PVH reported better-than-expected earnings despite a competitive retail scenario and highly promotional environment. Bottom-line results benefited from strong performance solely at its Tommy Hilfiger brand, supported by square footage expansion and a stronger euro.
Coming back to growth initiatives, the company remains focused on increasing its international presence in order to get a larger share of the $1.4 trillion global apparel retail market. Working on these strategies, PVH Corp. is strengthening its brands across North and Latin America, Europe and Asia through e-Commerce as well as licensing.
Since the beginning of 2014, it has entered into various licensing agreements with different companies across the globe to market and distribute its products. We believe that PVH Corp. is moving in the right direction and these strategies will help it to exploit opportunities in the lifestyle apparel market.
Further, the company is concentrating on higher margin businesses as evident from a series of past events, wherein the company has divested its underperforming businesses and acquired premium brands that complement its portfolio.
However, the company’s cautiously optimistic view for the rest of fiscal 2014, based on the soft macroeconomic environment, keeps us on the sidelines. Further, the company remains prone to intense competition from well-established players like Coach Inc. (COH), V.F. Corp. (VFC) and Ralph Lauren Corp. (RL) along with rising raw material prices, which may impact its performance.
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