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What Could Drive PVH’s Fiscal 4Q17 Top Line?

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How might PVH’s 2017 top line shape up?

PVH (PVH) is expected to close fiscal 2017 on a positive note. Management has projected a 7% growth in fiscal 2017 sales on a reported basis and a 6% increase in constant currency. Growth is expected to be driven by a 9% increase in its Calvin Klein business and an 8% rise in its Tommy Hilfiger revenues.

While a Mexico deconsolidation could negatively impact Calvin Klein sales, Tommy Hilfiger sales are likely to feel the impact from the G-III license. The two events could negatively impact fiscal 2017 sales by $150 million.

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What about the fourth quarter?

PVH management has projected an 11% rise in fiscal 4Q17 sales on a reported basis and an 8% rise on a constant currency basis. Sales during the quarter are expected to be positively impacted by the 53rd week in fiscal 2017 compared to fiscal 2016. On the other hand, a reduction in revenue arising from the Mexico deconsolidation and the G-III license, as well as a shift in sales ahead of the Chinese New Year, are expected to reduce sales.

Calvin Klein and Tommy Hilfiger are expected to have another solid quarter, with sales increasing 16% and 12%, respectively.

PVH’s international business is likely to continue the ongoing momentum in 4Q17. Calvin Klein’s international sales comps increased 6% during the first nine months of 2017, while Tommy Hilfiger’s comps rose 8% in the same period.

However, PVH’s performance has remained subdued in North America. Calvin Klein comps declined 3% during the first nine months of 2017, and Tommy Hilfiger comps fell 1%. However, the company has recently witnessed improving business trends in North America. It had a strong holiday season, driven by improvements in both traffic and sales trends.

ETF investors seeking to add exposure to PVH can consider the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), which invests 1.3% of its portfolio in PVH.

In the next part of this series, we’ll look at the margin expectations for PVH’s fiscal 4Q17.

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