Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

The Death Spiral

Is PVH Corp making money?

The PVH Corp (NYSE: PVH) has experienced phenomenal growth in recent months.

In particular, Stockrow estimates PVH’s revenues grew by 54.69% in the quarter ending on 30 April 2021. However, that growth came after four straight quarters of revenue shrinkage.

For example, the revenues shrank by -42.96% in the quarter ending on 30 April 2020, -33.13% in the quarter ending on 31 July 2020, -18.15% in the quarter ending on 31 October 2020, and -19.64% in the quarter that ended on 31 January 2021. The revenue shrinkage could have two meanings.

First, PVH’s management moved its products to new sales channels. For example, Amazon (AMZN) instead of its traditional retail revenue of department stores. Second, brick and mortar retail is recovering from COVID-19.

Did COVID-19 Make PVH Stronger?

My suspicion is the number one is the answer. The pandemic forced PVH (PVH) to dump department stores, which were closed, and sell online.  Hence, coronavirus could have made PVH stronger and more profitable.

There is some evidence that COVID-19 strengthened PVH. For example, PVH’s quarterly gross profit grew from $664 million on 30 April 2020 to $1.227 billion on 30 April 2021. Similarly, the quarterly operating income grew from -$281 million on 30 April 2020 to $197.4 million on 30 April 2021.

Moreover, PVH’s quarterly revenues grew from $1.344 billion on 30 April 2020 to $2.079 billion on 30 April 2021. One reason for the revenue growth could be that the pandemic stuck tens of millions of Americans stuck at home with nothing to do but shop online.

Is PVH getting stronger?

Conversely, the quarterly operating cash flow went from -$142 million on 30 April 2020 to $-189 million on 20 April 2021. Hence, PVH (PVH) is generating more revenue but not keeping cash.

My guess is that PVH is investing money in new marketing and distributing channels to make up for the lost department store business. Notably, PVH’s quarterly ending cash flow rose from $800.70 million on 30 April 2020 to $913.20 million on 30 April 2021.

Conversely, PVH borrowed some money in 2020. It reported quarterly financing cash flows of $336 million on 30 April 2020 and $231.40 million on 31 July 2020. However, PVH reported a -$449.60 million quarterly financing cash flow on 30 April 2021. Thus, PVH pays off debt.

Consequently, PVH’s total debt fell from $5.082 billion on 30 April 2020 to $4.843 billion on 30 April 2021. So the debt shrank slightly during the pandemic.

In contrast, PVH’s cash and short-term investments rose from $801 million on 30 April 2020 to $913 million on 30 April 2021. Thus, PVH finished the pandemic year with a little more cash.

What Value Does PVH have?

The PVH Corp’s value comes from the fashion brands it owns. Those brands include Calvin Kein, IZOD, Van Heuesen, Tommy Hilfiger, ARROW, Warner’s, Olga by Warner’s, Geoffrey Beene, and True.

However, PVH Corp (NYSE: PVH) is selling IZOD, Van Huesen, Arrow, and Geoffrey Beene to the Authentic Brands Group for $220 million. Instead, PVH will concentrate on its global growth brands Calvin Klein and Tommy Hilfiger, a press release states.

PVH still has value after the sale. Its Total Assets fell from $12.294 billion on 30 April 2020 to $12.702 billion on 30 April 2021.

I think the sale of the heritage brands is a smart move because it disentangles PVH from dying brick-and-mortar retailers and the retail apocalypse. In particular, department stores.

Can PVH Survive the Retail Apocalypse?

CoStar Group estimates 12,200 American stores closed in 2020, Forbes reports. The number of closings grew from 10,000 in 2019.

Department stores; the primary market for IZOD, Arrow, Geoffrey Been, and Van Huesen, were hard hit. Stage Stores, JC Penney and Neiman Marcus filed for bankruptcy in 2020, for example. Discounter Stein Mart died completely in 2020.  Macy’s (M) still lives but it plans to close 125 stores by 2022, CNBC reports. Macy’s closed 30 stores in 2020.

Given this reality, selling IZOD and ARROW makes sense. For instance, PVH could use the proceeds from the sale to build its own fulfillment center to market through Shopify (SHOP), Amazon (NASDAQ: AMZN) and eBay (EBAY). In addition, PVH could partner with growing retailers such as Kroger (KR), Costco (COST), and Target (TGT).

Is PVH’s global brands strategy smart?

A fulfillment center makes sense because Statista estimates US fashion e-commerce will grow from $110.6 billion in 2020 to $153.6 billion in 2024.

Statista estimates e-commerce compromises less than one third of the US apparel and footwear market. Statista estimates the size of the apparel and footwear market at $367.93 billion in April 2021.  

Conversely, Statista projects global retail sales of apparel and footwear will grow from $1.9 trillion in 2019 to $3.3 trillion in 2020. Hence, the big money is in global fashion, which makes the new global brand focus at PVH look smart.

I think PVH (PVH) could experience enormous growth in 2021. I suspect PVH will grow because US apparel sales fell by 19% in 2020, NPD estimates. Sales fell because stores were closed, people were not shopping, and upper-class people who buy the most clothes were not office and not going.

Now people are getting vaccinated and going out again. Hence, they will start buying clothes again. However, I suspect the new styles will be more casual and comfortable. Hence, there could be more demand for Calvin Klein.

Is PVH (PVH) a Good Stock?

The PVH (PVH) stock price more than doubled during the pandemic year. In detail, PVH’s share price grew from $47.46 on 2 July 2020 to $108.91on 2 July 2021.

Thus, PVH offers share value growth, but it pays no dividend. reports PVH last paid a dividend on 19 March 2020. It paid a 3.75₵ quarterly dividend on that date.

I think PVH is an interesting stock with a lot of growth potential. However, I think Mr. Market overpriced PVH at $108.91 on 2 July 2021. I advise investors to watch PVH but wait for the share price to collapse to buy.