Spring's almost here. The birds are chirping. The weather's warmer. Out in the country, folks are hanging the wash out to dry in air perfumed by blossoming flowers. Meanwhile, up on Wall Street, apparelier Phillips-Van Heusen (NYSE:PVH) has some laundry of its own to air. (How's that for a stretched segue?) The Q4 and full-year 2005 numbers arrive Monday after close of trading.

Wall Street Wisdom:

  • General consensus. Nine analysts follow Van Heusen. Of these, seven rate the stock a buy, and two more call it a hold.
  • Revenues. Q4 sales are expected to come in 14% stronger than last year, at $473.3 million.
  • Earnings. Impressive as that is, profits are predicted to outdo it. Analysts are calling for 32% profits growth to $0.37 per share.

Margin watch:
How do you turn 14% sales growth into nearly twice as much growth in profits? By expanding your margins, dropping more pennies to the bottom line from each dollar added to the top. Over the past 18 months, Van Heusen has expanded both its rolling gross and operating margins, and quadrupled its net profitability.

Margins %

8/04

10/04

1/05

5/05

7/05

10/05

Gross

43

44.4

45.8

45.5

45.9

46.5

Op.

5.8

6.6

8.6

9.7

10.3

11.2

Net

1.4

2

3.6

4.7

5.1

5.7
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ending in the named months.

Foolish forensics:
What's more, the company's margin improvement appears to have been accomplished the old-fashioned way. Rather than adding one-time benefits or removing one-time charges from the rolling results, Van Heusen is keeping costs and expenses in check even as sales grow. Over the past six months, sales have increased 15% on average. Meanwhile, Van Heusen kept the increase in the cost of goods sold under 11%, and the growth in selling, general, and administrative expenses to 12%.

Van Heusen's cash flow statement and balance sheet look similarly strong. Free cash flow is substantial, and neither inventories nor accounts receivable outpaced sales growth over the past six months. In short, Van Heusen may not be the flashiest of businesses, but it's certainly well-run. Unless Monday's news shows that the company has completely fallen apart, I'm going to have to agree with the analysts on this one: Van Heusen's looking pretty sharp.

Fool contributor Rich Smith has no interest, short or long, in Phillips-Van Heusen.