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PVH Corp on the Street: An Expectations Story

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Part 2
PVH Corp on the Street: An Expectations Story PART 2 OF 5

Why PVH Corp’s Top Line Will Likely Contract in 4Q16

PVH Corp’s sales likely to decline in 4Q16

PVH Corp (PVH) plans to report its 4Q16 results on March 23. The company, which owns the famous Tommy Hilfiger and Calvin Klein brands, has recorded a YTD (year-to-date) sales increase of 3.2% on a YoY (year-over-year) basis.

PVH Corp, however, expects a 1% YoY contraction in its top line for 4Q16. This will likely be a result of a 2% revenue decline, attributable to the licensing of US womenswear wholesale business to G-III Apparel Group (GIII) and its Mexico deconsolidation.

Why PVH Corp&#8217;s Top Line Will Likely Contract in 4Q16

Why PVH Corp&#8217;s Top Line Will Likely Contract in 4Q16

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Calvin Klein’s revenue is projected to fall 5% YoY (-3% on a constant currency basis), while that of Heritage brands is expected to fall 3%. Tommy Hilfiger’s sales are likely to expand 3% (5% on a constant currency basis) during the fourth quarter, and its top line is projected to grow 1% YoY for the quarter, on a constant currency basis.

Fiscal year expectations

The company’s fiscal 2016 revenue is expected to rise ~2% YoY (3% on a constant currency basis), driven by a 6% growth in revenue from the Calvin Klein business (8% on a constant currency basis), and to see a 4% jump in sales from its Tommy Hilfiger business (5% on a constant currency basis). Its revenue from the Heritage Brands business, however, is projected to fall 9%, mainly due to the ongoing rationalization initiatives.

Notably, ETF investors seeking to add exposure to PVH can consider the iShares Morningstar Mid-Cap ETF (JKG), which invests 0.4% of its portfolio in PVH.

Other apparel companies

Amid a tough macroeconomic backdrop and ongoing headwinds, including retail bankruptcies in the apparel sector, PVH Corp has put up a good show. Companies like Ralph Lauren (RL) and VF Corp (VFC) have fumbled and missed analyst expectations on many occasions. RL reported a sales fall of 12% YoY in its most recent quarter, while VFC posted flat sales.

Continue to the next section for a closer look at the company’s margins and profitability.

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