Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



The Donald Boosts Phillips-Van Heusen

Unlike Perry Ellis (Nasdaq: PERY  ) , which I reviewed the other day, Phillips-Van Heusen (NYSE: PVH  ) just might be an apparel stock that's worth a closer look. After all, PVH has less debt and a better return on capital, and the shares might just be undervalued. And besides, Phillips-Van Heusen has The Donald, and doesn't every Ivy League Apprentice wannabe want to dress like The Donald?

Third-quarter results looked pretty good on the rack. Sales were up about 13%, fueled by good sales in dress shirts and sportswear. Signature lines such as Chaps, Sean John, and Donald Trump boosted shirts, while Calvin Klein did the heavy lifting in sportswear. Margins also picked up nicely at both the gross and operating levels. On the bottom line, excluding year-ago restructuring costs, net income grew more than 30%.

I don't believe there's any particular secret here with the company. Brands such as Van Heusen, Bass, IZOD, Calvin Klein, and Arrow continue to sell well because they're appealing from both a style and price perspective. And we've seen in the retailing world that good concepts (Abercrombie & Fitch (NYSE: ANF  ) and Chico's (NYSE: CHS  ) ) will thrive, while out-of-touch concepts (Hot Topic (Nasdaq: HOTT  ) and, increasingly, Gap (NYSE: GPS  ) ) will have a more difficult time.

My major concern with Phillips-Van Heusen at this point is its sales channel. There's nothing wrong with selling to Wal-Mart or department store staples such as Kohl's (NYSE: KSS  ) or J.C. Penney (NYSE: JCP  ) . But those places aren't where the hot retailing growth has been. Is this going to leave the company more vulnerable to a slowdown in mall traffic? I'm inclined to say "no," and I happen to believe that the demise of the department store has been exaggerated. But it still rates as a concern.

Plugging numbers into my cash flow valuation model, I see both good and bad news. The stock would still seem to be undervalued, although not so much as to fall within my margin of safety standards. Should there be a retail-wide freakout, though (say, because of a disappointing after-Thanksgiving Friday), I might take a second look.

For more fashionable Foolishness:

Gap is aMotley Fool Stock Advisorrecommendation. Click here for a 30-day free trial.

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 498304, ~/Articles/ArticleHandler.aspx, 10/28/2016 4:06:54 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,173.99 4.31 0.02%
S&P 500 2,126.70 -6.34 -0.30%
NASD 5,192.44 -23.53 -0.45%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/28/2016 3:51 PM
ANF $14.87 Down -0.22 -1.43%
Abercrombie and Fi… CAPS Rating: *
CHS $11.72 Down -0.02 -0.17%
Chico's FAS CAPS Rating: **
GPS $27.18 Up +0.56 +2.08%
Gap CAPS Rating: **
HOTT.DL $0.00 Down +0.00 +0.00%
Hot Topic CAPS Rating: No stars
JCP $8.50 Up +0.19 +2.29%
J.C. Penney CAPS Rating: *
KSS $44.19 Up +0.49 +1.12%
Kohl's CAPS Rating: **
PERY $18.58 Down -0.01 -0.05%
Perry Ellis CAPS Rating: ***