Calvin Klein Helped PVH Close Fiscal 2015 in Style
Company’s earnings guidance for first quarter of 2016
After beating revenue and earnings estimates in fiscal 4Q15, PVH (PVH) is looking to start the new fiscal year with a strong performance. The company has predicted its earnings per share to be in the range of $1.40–$1.45 during fiscal 1Q16 compared to $1.38 in fiscal 1Q15.
PVH expects its fiscal 1Q16 earnings to be negatively impacted by ~$0.50 per share in foreign currency exchange rate transactions and translations.
The negative impact on a transactional basis is the result of PVH’s international businesses purchasing inventories in US dollars. The increased local currency value of inventories results in higher costs of goods when they are sold. On the other hand, negative translation impact results from converting earnings generated in foreign currencies into fewer US dollars.
What will PVH’s growth drivers be?
PVH expects its businesses to display robust performances in fiscal 1Q16. After ignoring currency impacts, the company expects EPS growth to be around 27%–30%. Revenue is predicted to rise by around 3% YoY (year-over-year) on a constant currency basis, ~1% on a GAAP (generally accepted accounting principles) basis, driven by the following factors:
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a 12% YoY rise in revenue for Calvin Klein on a constant currency basis (~8% rise on a GAAP basis)
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a 2% rise in revenue for Tommy Hilfiger on a constant currency basis (approximately 1% rise on a GAAP basis), likely to be driven by a strong performance in Europe. Tommy Hilfiger’s European spring and summer 2016 wholesale orderbook is up 4%, and its fall and holiday 2016 wholesale sales are also up about 4%
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a ~9% fall in revenue for Heritage Brands on a GAAP basis, mostly due to the continued rationalization of the business
Investors seeking to add exposure to PVH along with other apparel companies such as Coach (COH), Hanesbrands (HBI), Michael Kors (KORS), and Ralph Lauren (RL) can consider the SPDR S&P 500 ETF (SPY), which invests 0.25% of its portfolio in these companies.
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