Analyzing PVH’s segments
PVH Corporation (PVH) reports its business under three major segments:
- Calvin Klein, which includes the brand’s operations in North America and international markets
- Tommy Hilfiger, which includes the brand’s operations in North America and international markets
- Heritage Brands, which consists of the Heritage Brands Wholesale and Heritage Brands Retail segments
Tommy Hilfiger brand overview
PVH acquired Tommy Hilfiger in 2010. Since then, the brand’s total sales have risen by about 1.7 times, though its 2015 revenue witnessed some deceleration. The brand’s revenue fell by ~6% in 2015 and stood at $3.3 billion.
Evaluating Tommy Hilfiger’s 1Q16 performance
Tommy Hilfiger started 2016 on a splendid note with revenue growth in excess of 4% year-over-year (or YoY) on a constant currency basis and ~3% YoY on a GAAP (generally accepted accounting principles) basis in 1Q16. The brand returned to positive growth after being in the red for four consecutive quarters.
International business boosted Tommy’s revenue in 1Q16
Tommy Hilfiger’s top line growth was mainly driven by its outstanding performance in international markets, where its sales rose by 11%. However, its international revenue has been under pressure for some time, as it’s been bearing the brunt of currency headwinds. The segment reported six consecutive quarters of negative growth starting in 3Q14.
Tommy’s international business is of prime importance to the brand, as ~58% of its total revenue came from this market in 1Q16. The company is working toward boosting its international sales. It plans to increase its marketing spending in its international markets and believes such investments could lift its sales from 2017 onward.
The company is also expanding its international presence through acquisitions and by entering into licensing agreements. It recently acquired the remaining 55% interest in its Chinese joint venture in order to have better control over its Chinese operations. The acquisition is expected to add ~$100 million to PVH’s top line and to be slightly accretive to its 2016 earnings per share.
Index and ETF exposure
Investors seeking to add exposure to PVH and the above-mentioned companies can consider the SPDR S&P 500 ETF (SPY), which invests 0.25% of its portfolio in these companies.