PVH (PVH) Soars on Strong First Quarter Results
Shares of apparel maker PVH Corporation (PVH) surged last week, after the parent company of Calvin Klein, Tommy Hilfiger and Izod reported robust first quarter earnings that exceeded analyst estimates. For the quarter, PVH earned $1.91 per share, topping the consensus estimate of $1.35 per share and rising 241% from the prior year quarter. Revenue rose 35.7% to $1.94 billion, also beating the forecast of $1.91 billion.
PVH attributed its strong earnings to the addition of $487 million in revenue generated by the Warnaco businesses it acquired last year, which gave it complete control of the Calvin Klein brand. PVH originally controlled Calvin Klein's sportswear and higher-end collections, but the $2.9 billion acquisition of Warnaco also brought in its more profitable denim and underwear businesses. Daily Chart
Although the Warnaco acquisition has weighed down earnings, PVH's investment was a wise one. Its Calvin Klein business reported a 143.5% increase in sales from the prior year quarter as a result of its increased product portfolio. Sales growth at Tommy Hilfiger only rose 5%, after reporting 9% year-on-year growth last quarter. Meanwhile, its Heritage Brands segment, which includes Izod, Van Heusen, Bass and Arrow, staged a stunning turnaround with 24% growth, a sharp reversal of the 2% decline it reported last quarter. However, Heritage's decline in sales last quarter was primarily attributed to its exit from the Izod's women and Timberland wholesale sportswear businesses - two underperforming lower-margin businesses that had been weighing down on its bottom line. Last quarter, investors were worried that PVH would have difficulties merging Warnaco's operations with its own, since CEO Emanuel Chirico had stated that the integration would take 24 to 30 months to complete, up from the 15 to 18 months it originally projected. Chirico emphasized that exceed inventory in Asia and North America needs to be cleared, and that the reputation of its denim and underwear brands as higher-end labels needed to be rebuilt after being diluted through too many off-price retail channels. PVH invested heavily during the quarter on denim and underwear redesigns and increased marketing initiatives. As a result, the company expects an "increase in expenses in the second half of the year" to "enhance the existing operating infrastructure and fill key positions across the organization." However, Chirico noted that PVH's core brands were all showing strong global growth, "despite the macro-environment and unseasonably cold weather that negatively impacted sales of spring product in North America and Europe." Looking forward, PVH anticipates earnings of $1.35 per share, in line with analyst projections. Revenue is forecast to come in at $1.9 billion, exceeding the consensus estimate of $1.84 billion. The company also reaffirmed its full year EPS guidance of $7.00 per share on revenue of $8.2 billion. Shares of PVH currently trade at 14.9 times forward earnings with a 5-year PEG ratio of 1.4. The stock pays a small 0.10% quarterly dividend. Other News About PVH Cramer: Good Looking Earnings fromPVH
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Published on Jun 17, 2013
By Leo Sun