Investopedia: PVH - Maybe Not Spectacular, But Solid Will Do

'Tis the season when shoppers and retail investors are a little more prone to losing their ever-loving minds, so it wasn't altogether shocking to see PVH Corp (NYSE:PVH) do well on strong volume after a respectable, but not spectacular quarter. I continue to believe that PVH is a well-run apparel company, and that its acquisition of Warnaco (NYSE:WRC) is a strong move with benefits in both the short and long term, but it's hard to see today's price as any sort of holiday special.

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Investopedia: Uniting CK Should Pay Off For PVH Corp

The apparel and footwear sectors have been seeing more than their share of acquisition activity over the past year, as companies look to better leverage supply chains and distribution and better compete with overseas competitors. PVH Corp (NYSE:PVH) is paying a lot to bring Warnaco (NYSE:WRC) into the fold (and further consolidate the Calvin Klein brand), but this deal looks like a relative win-win, where both the acquirer and the acquired are making a smart deal.

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Investopedia: Can Hanesbrands Leverage Successful Brands Into Better Financials?

There's not much debate about the quality of the brands that Hanesbrands (NYSE:HBI) owns. Names like Hanes, Champion and Playtex resonate with consumers, and when it comes to innerwear, a large percentage of shoppers stick with a single brand for decades at a time. This company has not always managed to convert that brand value into shareholder value, though the stock has rebounded sharply from the lows of 2009. Now the question is whether management can not only maintain the value of these brands, but also wring more expenses out of the operations and deleverage the business.

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Investopedia: Should Investors Pay Full Price For PVH?

Despite a steady drumbeat of doom and gloom (it's an election year after all), investors haven't needed much coaxing to buy up retail and apparel stocks this year. PVH (NYSE:PVH) has a lot going for it, including two well-known brands that seem capable of defying gravity in Europe, but the stock's performance has already more than doubled that of the S&P 500 over the trailing year. While the company does seem to have operating momentum on its side, valuation already presumes a lot of things go right for this company.

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Investopedia: HanesBrands May Soon Start Stretching Out Its Free Cash Flow

Innerware manufacturer HanesBrands (NYSE:HBI) has to contend with fierce competition, powerful retailers, and a balance sheet that is far less than ideal. Although apparel manufacturing is going to remain a tough business for the foreseeable future and HanesBrands doesn't look cheap by conventional metrics, investors who look no further than the P/E or EV/EBITDA ratios may miss an interesting free cash flow expansion story in its early stages.

A Tough Quarter  
For a variety of reasons, HanesBrands delivered another poor quarter. Sales were slightly negative, as the company had to deal with retailers clearing out cold weather inventories, aggressive competition in graphic tees and some turbulence with Wal-Mart (NYSE:WMT). At the same time, higher cotton prices thumped margins (gross margin down more than a point) and operating income fell about 8%.

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Investopedia: Maidenform Pulled Out Of Shape

Players in the intimate apparel space, like Hanesbrands (NYSE: HBI) and Warnaco (NYSE: WRC), warned earlier this month that the market was not so strong, and data from retailers like J.C. Penney (NYSE: JCP) and Kohl's (NYSE: KSS) was likewise not encouraging. Even with that backdrop, though, Maidenform Brands (NYSE: MFB) surprised the Street with a very disappointing third quarter and some self-inflicted wounds only made matters worse.

A Poor Q3  
There's no value in sugar-coating what was a lousy report from Maidenform. Sales rose less than 2%, while sell side analysts had been expecting 11% growth, versus last year's quarter. Wholesale sales, the bulk of MFB's revenue base, rose just barely more than 1%, but the results were curiously mixed. Sales to mass merchants like Wal-mart (NYSE: WMT) and Target (NYSE: TGT) jumped 15%, but sales to department stores were down almost 1%. (To know more about buy side and sell side analysts, read: Buy Side Vs. Sell Side Analysts.)


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Investopedia: High Cotton Or Not, Phillips-Van Heusen Worth A Look

There are not too many truly cheap stocks out there, nor a surplus of stories that are completely spot-free. In times like these, investors have to move on to stories where certain concerns are inflated or where undervaluation lies beyond the quick valuation ratios and in the cash flow capabilities of the company. Clothing wholesaler and retailer Phillips-Van Heusen (NYSE:PVH) is one such candidate - a quality company that is not necessarily cheap on first blush, but looks like a quality undervalued opportunity.
 
A Solid End to the Year
PVH's earnings are not necessarily easy to digest - the company made a major acquisition (Tommy Hilfiger) and that makes the year-on-year comparisons a little more difficult. To the company's credit, though, they give investors an unusually-extensive amount of financial detail and it looks like the quarter was solid with or without the acquisition.

As reported, revenue jumped almost 128% to just under $1.4 billion, and beat the average analyst guess. The inclusion of over $700 million in Tommy Hilfiger revenue clearly made a major difference, though the core organic growth rate looks like it came in at more than 12%. In particular, the Calvin Klein business rose over 18%, with licensing revenue (from the likes of Warnaco (Nasdaq:WRNC) and G-III Apparel (Nasdaq:GIII)) up 11%.

Profitability was more of a mixed story. Gross margin did improve almost three points, but that was still less than most analysts expected. Likewise, adjusted operating margin of over 9% was not bad but not great relative to expectations. All in all, then, PVH's outperformance this quarter was fueled by higher sales and lower taxes, offset by some margin challenges.


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