PVH: Pulling The Goalie? Initial Take on 2Q

PVH 2H guidance still does not look like a slam dunk to me. The company is in a precarious position right now. I’ll refer, as usual, to my little inventory/margin Quad chart below. This quarter PVH slipped into the zone where gross margins are 184bps higher than last year, but where inventories are outclipping sales growth by 4%. If you check out PVH’s chart over the past few years, you’ll see that when inventories are growing faster than sales, this stock does not go up.

Moreover, the company’s guidance suggests that we need to see a 200-300bp revenue acceleration on a normalized run rate. Yes, we’ll see a ramp in PVH’s new Timberland business, and growth in Izod, but at a combined size of sub-5% of total, they’re still not particularly meaningful. Calvin Klein’s licensing business continues to crank – and I don’t have many concerns there aside from the negative impact of FX that is passed through indirectly to PVH. But let’s remember that ½ of the company’s cash flow is still men’s dress furnishings, which is in the bulls eye of both the negative secular inflection point for margins due to changes in sourcing patterns and global trade, as well as a cyclical hurdle in the form of white collar layoffs (see my prior posts on this relationship ).

With the company beating 2Q by a penney, and deleveraging SG&A by 233bps (more than I suspected) it smells to me like this company could have beat the quarter by much more than it did. That’s a positive in some respects, unless PVH only printed what it had to in order to keep its powder dry to fund an otherwise daunting (or simply unknown) 2H.

Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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