PVH: A Cheap Retail Buy
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
PVH Corp. (NYSE: PVH) licenses, merchandises, distributes, and sells apparel lines such as Calvin Klein, Izod, Van Heusen, Chaps, Kenneth Cole, and Tommy Hilfiger. PVH is the largest shirt company in the world and sells its products through 17,000 retail venues, including department stores and 1,000 stores of its own.
The company has seen its shares increase 31% in the past year, yet it currently os one of the cheapest names in the apparel sector. However, analysts predict the shares could rally to $106 in the next 12 months as the company pursues opportunities for new sales growth and margin expansion in some of its better-known brands. PVH has consistently lagged behind some of its competitors. However, the company's business strategies show that they have room to grow. Since PVH took on Calvin Klein in 2003 retail sales of the brand have doubled, enlarging its global sales footprint. The company has also done similar things for their Tommy Hilfiger brand. Also, PVH's annual cash flow is more than twice its current debt level.
Some of PVH's direct competitors include Perry Ellis International (NASDAQ: PERY) and Ralph Lauren (NYSE: RL). Perry Ellis designs, sources, markets, and licenses products under various brands. It sells its brands mostly in upscale outlet stores. Currently they operate 45 stores across the U.S. Perry Ellis is also a very cheap company. However, they don't size up in terms of market share or growth potential. Claiming homes in retail outlet malls and nowhere else is not exactly the way to expand sales.
Ralph Lauren appears to be overpriced for the most part. The company produces several spinoffs of the Ralph Lauren brand, but does not provide much in the way of either product or market diversification. Ralph Lauren's brands are largely considered to be for the upscale client. Any attempt to reach a more broad customer base would have to be done under a new brand. This type of change does not appear to be in the plans for Ralph Lauren's future. This company seems to have tapped out its current market.
There is also VF Corporation (NYSE: VFC), maker of Wrangler, Nautica, and Vans. They also provide more upscale brands such as 7 for all Mankind. VFC has seen its shares rise 46% in the past year. They do cost a bit more than PVH, though. So you are not getting quite the great buy. VFC also does not seem to have the innovative approach that PVH possesses in expanding its retail sales. For the most part, their brands are not as well sought out as PVH's. And unlike PVH, they do not make much headway in expanding their brands. They do have a growth plan in place, but the question for the investor is whether it will be enough growth to affect the share price.
PVH is a relatively cheap company. It has easily integrated newly acquired brands into the global sales landscape effectively and profitably. Its success with Calvin Klein and Tommy Hilfiger proves the company's talent. Some might overlook this company, but it is a great deal for those looking to buy. More affordable than some of its counterparts, but with a large potential market share. PVH also seems to have the business strategy to keep moving the company foreward. This retail company is a great value for any investor.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of Perry Ellis International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.