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PVH remains one of our favorite longs in 2012. Less than four weeks after reporting Q4 results, PVH preannounced after the close that Q1 EPS will come in ‘at least at the high end of guidance’ suggesting that CK and Tommy sales are still coming in ahead of plan and upside to Q1 EPS.

This is not new news. In fact, an in-line quarter would have been suggesting a deceleration in trends at CK, Tommy, or both since March to get there. As highlighted in our post on 3/28 ("PVH: Levers & Drivers"), we think PVH is going to pull a RL and end up coming in above the Street’s original $1.32E despite guiding to a more conservative $1.20-$1.25 range. This afternoon’s announcement suggests this scenario is increasingly likely. We’re at $1.36 for the quarter vs. the Street at $1.25E.

The company is also tracking towards the high-end of its full-year outlook of $6.10-$6.20. We’re at $6.45 in EPS for 2012 driven by stronger sales rather than a reduction in spending. More importantly, PVH is doing what the best brands do that license out their brands in order to grow into international markets – it’s starting to take back control of its own content. Driving brand sales directly at higher margin was key to RL’s success through much of the last decade as the company bought in its licenses. We don’t expect PVH to be any different. With earnings power of $8 in 2013, we think the stock and estimates are headed higher.

For more detail following Q4 results, see our post "PVH: Levers & Drivers."

Casey Flavin

Director