Strong brands are money in the bank. And brand-driven companies like PVH Corp (PVH), which owns Calvin Klein and Tommy Hilfiger, are prospering mightily.
PVH’s secret is regularly hitting the acquisition trail to pump up its business. One of the world’s largest apparel companies, PVH bought Calvin Klein in 2003 and added Tommy Hilfiger last year. These strong brands give PVH pricing power to weather rising product costs. In a highly fragmented market, where 20 companies make up 30 percent of total apparel sales, there’s lots of room for expansion.
The strategy is paying off. Second quarter revenues rose 21 percent to $1.33 billion versus $1.10 billion a year ago. That mainly came from Tommy Hilfiger (where revenues rose 30 percent), and Calvin Kein (19 percent rise). But PVH also owns the Heritage segment, which includes company-owned brands such as Van Heusen, IZOD, and ARROW, where revenues rose 9 percent.
Second-quarter earnings per share for PVH soared 39 percent. CEO Emanuel Chirico noted how the thriving Calvin Klein and Tommy Hilfiger businesses “translate into strong performance,” impacting both earnings and sales.
Dress for success
PVH has lots of admirers. Of the 14 analysts followed by Thomson/First Call, five have strong buy recommendations and six have buys, with three holds.
S&P analysts rate the apparel company a buy, citing its ability to capture additional apparel market share. The Tommy Hilfiger acquisition strengthens PVH’s position in better-priced apparel, analysts noted. The company reports next on or about Dec. 1.
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