Strong Start To The Holiday Season Aids PVH Corp Outlook

Robust earnings history and brand strength have been the cornerstones for success of PVH Corporation PVH. The company kept the trend alive in the recently reported third-quarter fiscal 2017, where earnings and sales topped estimates backed by solid momentum at its premium Calvin Klein and Tommy Hilfiger brands.

Driven by the solid third-quarter results, improvement in foreign currency rates and continued strength across its brands, PVH Corp anticipates delivering robust revenues and earnings in fourth-quarter 2017. This favorable view further backed by the strong start to the holiday season and the additional $20 million increase in marketing expenditures to take advantage of the continued momentum across its businesses. Moreover, the company raised guidance for fiscal 2017 on the aforementioned favorable trends.

PVH Expects Strong Q4 on Solid Start to Holiday Season

For fourth-quarter fiscal 2017, the company expects total revenues to jump 11% year over year, while it is anticipated to advance 8% on a constant-currency basis. The company's revenue growth guidance is in line with the Zacks Consensus Estimated revenue growth rate. While fourth-quarter revenues will be positively impacted by the inclusion of the 53rd week, it will bear the brunt of Mexico deconsolidation, the G-III Apparel licensing, and a shift in the selling period in advance of the Chinese New Year, which will fall in first-quarter fiscal 2018 this year.

Brand-wise, revenues are expected to jump 16% (or 12% on a currency-neutral basis) at Calvin Klein, and 12% (or 7% on a currency-neutral basis) at Tommy Hilfiger, while revenues for Heritage Brands are anticipated to decline nearly 1%.

Adjusted earnings per share for the fiscal fourth-quarter are expected to be $1.42-$1.44, including 2 cents per share positive impact from foreign currency translations. The Zacks Consensus Estimate for the fourth quarter is pegged at $1.43 per share, which is at the mid-point of the company's estimated range. On a GAAP basis, the company envisions earnings per share of $1.35-$1.37.

Raised Fiscal 2017 View

For fiscal 2017, the company now projects revenues to rise 7% year over year, while constant-currency revenues are expected to grow 6%. Earlier, the company forecasted revenue growth of 6%, with constant-currency revenues improving 5%. Currently, the Zacks Consensus revenue estimate for fiscal 2017 is pegged at $8.7 billion, reflecting growth of nearly 6.1%, which lags the company's estimate.

Management expects revenues to continue being dented by the licensing deal with G-III Apparel and a $150 million reduction due to the Mexico deconsolidation.

Brand-wise, revenues are anticipated to increase 9% (or 7% on a currency-neutral basis) for Calvin Klein and 8% (or 7% on a currency-neutral basis) for Tommy Hilfiger. Earlier, the company had projected revenue growth of 8% for Calvin Klein (7% on a currency-neutral basis) and 6% for Tommy Hilfiger (5% on currency-neutral basis). However, the company continues to expect revenues for Heritage Brands to be flat year over year.

Management now envisions fiscal 2017 adjusted earnings per share in the range of $7.78-$7.80, compared with $7.60-$7.70 expected previously. The Zacks Consensus Estimate for fiscal 2017 is $7.76 per share, which is below the company's guidance range.

The latest outlook includes an expected 17 cents per share negative impact from currency headwinds. The guidance also includes an additional $20 million marketing expenditures for Calvin Klein in the fourth quarter. On a GAAP basis, the company projects fiscal 2017 earnings per share in the range of $6.80-$6.82 compared with previous guidance of $6.44-$6.54.

Stock Performance

Though the company's shares plunged nearly 2.1% since reporting earnings on Nov 29, it has gained a significant 48.8% year to date. This also marks an outperformance compared with the industry's growth of 2.2%.

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