E-Commerce Provides the Necessary Cushion for PVH’s Business



Channel analysis

PVH Corporation (PVH) distributes its clothing and accessories through its wholesale partners, its own retail locations, licensing channels, and e-commerce sites. In this article, we’ll analyze the performance of each of these channels in 2Q16.

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Performance of the wholesale business

PVH’s wholesale business has delivered outstanding performance in North America as well as in international markets. Both Calvin Klein and Tommy Hilfiger experienced very healthy wholesale selling in 2Q16.

In North America, Tommy Hilfiger’s men’s wholesale business, in particular, saw stronger sell-throughs and higher average unit retails. The brand’s international wholesale business also remained strong. The brand’s fall sales are projected to rise by 6% YoY (year-over-year), while its spring 2017 orderbook is running up by 7% YoY.

Calvin Klein’s international fall 2016 sales are projected to rise in the high-teens, while its spring 2017 orderbook is running up by about 20% YoY.

Performance of the retail business

As discussed earlier in this series, PVH’s retail business in North America has been under pressure due to certain macroeconomic headwinds and lower footfalls at the company’s stores in international tourist locations.

However, the company’s international retail business has shown continuous strength, with Europe experiencing healthy comparable store sales growth.

E-commerce sales are a key revenue driver

The performance from the e-commerce channel was outstanding. Revenue from this channel rose in excess of 20% during the quarter.

The online channel is becoming increasingly important in the retail business, and apparel and fashion companies are no exception. Many of PVH’s peers have reported solid growth in online sales.

For its quarter ended July 2, 2016, VF Corporation (VFC) reported a 30% rise in e-commerce revenue. Even for Kate Spade (KATE), online sales contributed strongly toward its top line growth. The company reported sales comps growth of 4% in its most recent quarter. However, after excluding e-commerce sales, its comparable sales growth was only about 1%.

Ralph Lauren (RL) was an exception, though. The company reported a 6% fall in global e-commerce revenue and a 3% fall in overall retail sales.

ETF investors seeking to add exposure to PVH can consider the iShares Morningstar Mid-Cap ETF (JKG), which invests 0.52% of its portfolio in PVH.


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