PVH Corp's (PVH) Upsurge Continues: Gains from Solid Q2

The owner of Calvin Klein and Tommy Hilfiger brands, PVH Corp. PVH seems to be on a roll backed by its superior brands, splendid earnings history, strategic growth efforts and robust financials. Shares of this textile-apparel designer and marketer have surged 47.7% on a year-to-date basis.

PVH Corp. delivered another impressive quarter with its second-quarter fiscal 2016 earnings per share surpassing estimates for the ninth consecutive time. The company also outdid its own earnings guidance, while the top line grew year over year. Results mainly gained from continued strength in its Calvin Klein and Tommy Hilfiger brands, owing to the momentum in the international and U.S. wholesale businesses.

PVH CORP Price and Consensus

PVH CORP Price and Consensus | PVH CORP Quote

Further, management raised its earnings per share guidance for fiscal 2016, as it remains confident of its solid business strategies and ongoing investments in top-quality brands. These factors indicate that the company is well positioned to maintain its upbeat performance, going forward.

Further, PVH Corp.’s diversified brand portfolio allows it to stay ahead of its peers to generate above-average industry growth and sustain its position amid the current challenging environment. The company’s approach to brand management assists each of its brands to develop further through efficient marketing strategies, financial control and operating leverage. Based on the strength of many of its brands, particularly Tommy Hilfiger and Calvin Klein, along with opportunities with regard to distribution, we believe that the company is poised for long-term growth.

Additionally, the company has been focused on higher-margin businesses. To this end, the company shut down its Izod retail division as the unit’s unviable business model did not generate optimum returns. Moreover, it has divested all assets of its underperforming division, G.H. Bass & Co and acquired The Warnaco Group Inc. The Warnaco Group acquisition facilitated the addition of Calvin Klein Jeanswear and Calvin Klein Underwear to its owned and operated Calvin Klein brand portfolio.

However, what remains a concern is PVH’s significant global presence, which exposes it to foreign currency risks in the current scenario, as the U.S. dollar continues to improve. These headwinds have been hurting the company’s results for a while now. Evidently, PVH Corp.’s second-quarter fiscal 2016 earnings included 46 cents per share impact from adverse forex rates. Further, the company anticipates the currency headwinds to persist in fiscal 2016, which is reflected by its outlook. PVH Corp. expects currency fluctuations to adversely impact fiscal 2016 and third-quarter earnings by $1.60 and 45 cents per share, respectively.

Alongside, the company expects volatility in the overall retail environment, intense promotions and unpredictable global consumer spending to remain hurdles.

Nonetheless, management remains optimistic of its solid business strategies and ongoing investments in top-quality brands.

Zacks Rank

PVH currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Delta Apparel Inc. DLA, Ralph Lauren Corp. RL) and Oxford Industries Inc. OXM, each carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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