One must take a look at the owner of superior brands like Calvin Klein and Tommy Hilfiger – PVH Corp. PVH, which possesses solid fundamentals and a splendid earnings history. These factors have driven the company's shares by 31.4% year to date.
PVH’s diversified brand portfolio allows the company to stay ahead of its peers, to generate above-average industry growth and sustain its position in the current challenging environment. The company’s approach to brand management facilitates each of its brands to develop further through efficient marketing strategies, financial control and operating leverage.
Further, the company has been focused on higher-margin businesses. In this regard, PVH shut down many underperforming businesses and operations as they could not generate optimum returns. Moreover, the company penned various licensing and partnership deals, in an attempt to concentrate on other developing brands and utilize its resources toward several growth opportunities.
Apart from this, PVH boasts a healthy financial status. The company’s ability to generate strong operating cash flow has helped in the execution of its long-term strategies such as global expansion, product enhancement and brand offerings, and building of operational infrastructure.
Together these factors have played a significant role in boosting PVH’s earnings, which have outperformed the Zacks Consensus Estimate for seven straight quarters now, with a trailing four-quarter average surprise of 6.9%.
In fact, the company recently reported spectacular fourth-quarter fiscal 2015 results, wherein both the top and bottom lines cruised ahead of the Zacks Consensus Estimate, and also outdid its own guidance. The upside was mainly driven by strength in its Calvin Klein and Tommy Hilfiger brands, owing to which sales also improved year over year. Shares of the company have jumped 10.1% since the earnings announcement.
However, what remains a concern is PVH’s significant global presence, which exposes it to foreign currency risks in the current scenario, where the U.S. dollar is gaining strength. The currency headwinds, which may hurt the company’s results, are expected to persist in fiscal 2016, as reflected by its outlook.
Alongside, the company expects volatility in the overall retail environment and unpredictable global consumer spending to remain hurdles. These factors have also led to a downtrend in the Zacks Consensus Estimate for fiscal 2016.
Nonetheless, management remains confident of its solid business strategies and ongoing investments in top-quality brands.
Zacks Rank
PVH currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same industry include Delta Apparel Inc. DLA, with a Zacks Rank #1 (Strong Buy), Columbia Sportswear Company COLM and Michael Kors Holdings Limited KORS, both carrying a Zacks Rank #2 (Buy).
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