PVH Corp. PVH seems to be on a roll after delivering better-than-expected results for first-quarter fiscal 2016. Shares of this textile-apparel designer and marketer surged 39.5% year to date. Let’s delve deeper and try to find the reasons to hold on to this attractive stock.
Driving Strategies
PVH Corp.’s diversified brand portfolio allows it to stay ahead of its peers to generate above-average industry growth and sustain its position amid 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. Based on the strength of many of its brands, particularly Tommy Hilfiger and Calvin Klein, coupled with opportunities with regard to distribution, we believe that the company is poised for long-term growth.
In a series of past events, PVH Corp. made it clear that it will concentrate on higher-margin businesses. In connection with this, the company shut down its Izod retail division as the unit’s unviable business model did not generate optimum returns. Moreover, it divested all assets of its underperforming division, G.H. Bass & Co and acquired The Warnaco Group Inc. This acquisition facilitated the addition of Calvin Klein Jeanswear and Calvin Klein Underwear to its owned and operated Calvin Klein brand portfolio.
Quarterly Performance Impresses
PVH Corp. began fiscal 2016 on a splendid note, as both its top and bottom lines cruised ahead of the Zacks Consensus Estimate, and also outdid its own guidance. Notably, the first quarter marked the company’s eighth consecutive earnings beat, with a trailing four-quarter average surprise of 5.9%. Results mainly gained from strong performance of the company’s Calvin Klein and Tommy Hilfiger brands. Encouraged by this performance, management raised its guidance for fiscal 2016, as it remains confident of its solid business strategies and ongoing investments in top-quality brands.
PVH CORP Price and Consensus
The Overhangs
Though the company’s first-quarter results were impressive, it continues to bear the brunt of foreign currency headwinds, which are also expected to linger going forward. Additionally, volatility in the overall retail environment, intense promotions and unpredictable global consumer spending, pose threats.
Additionally, the company operates in a highly fragmented market and competes with a number of well-established players. Failure to offer high-quality distinguished products at a competitive price may hamper PVH Corp.’s market share.
Given the pros and cons embedded, the stock currently carries a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Investors interested in the retail space may consider some better-ranked stocks such as Delta Apparel Inc. DLA, sporting a Zacks Rank #1 (Strong Buy), and The Children's Place, Inc. PLCE and Carter's, Inc. CRI, both carrying a Zacks Rank #2 (Buy).
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