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Which Apparel Companies Were Hit the Hardest by Brexit?

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Jul. 8 2016, Updated 2:04 a.m. ET

Brexit and the US apparel and accessories sector

Britain’s decision to leave the European Union on June 23 resulted in the S&P 500 Apparel and Accessories Index falling 5.4% the next day. All seven companies included in the index, namely PVH (PVH) (-8.9%), Ralph Lauren (RL) (-7.9%), Hanesbrands (HBI) (-3.2%), VF (VFC) (-5.7%), Coach (COH) (-4.8%), Michael Kors (KORS) (-6.3%), and Under Armour (UA) (-2.5%), registered a fall in their stock prices. PVH reported the biggest drop in the group. The fall came after the company announced that UK revenues constitute 3% of its total revenues.

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Brexit’s impact on PVH

PVH derives around 45% of its revenues from international markets (i.e., outside North America). The company has the highest international exposure of its peer group. Its competitors VFC (VFC), Ralph Lauren (RL), Kate Spade (KATE), and Michael Kors (KORS) derived 37%, 34%, 19%, and 22% of their respective revenues from international markets in their last fiscal years.

For some time now, PVH’s top line has been bearing the brunt of a stronger dollar. Brexit might further strengthen the US dollar and add to the company’s woes. However, since only 3% of the company’s revenues are derived from the United Kingdom, the impact might be limited and short-lived.

ETF investors seeking to add exposure to PVH can consider the First Trust Consumer Discretionary AlphaDEX Fund (FXD), which invests 1.0% of its portfolio in PVH. FXD also invests in Micheal Kors (KORS), Ralph Lauren (RL), and Coach (COH). The ETF invests 1.1%, 1.1%, and 0.78% of its holdings in KORS, RL, and COH, respectively.

In the next part of this series, we’ll look at PVH’s stock performance.

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