Develop a stable of well-regarded brands, and you can watch the cash flow roll in. Of course there's a little more to it than that, but the fact remains that Phillips-Van Heusen (NYSE:PVH) has been able to couple some good growth opportunities (like its Calvin Klein lines) with more mature, solid generators of cash (IZOD and Arrow).
In the fourth quarter, all that spelled another outperformance of analyst estimates. Revenue rose by 11%, and the company leveraged better margins, resulting in more than 32% reported net income growth. Earnings growth was actually stronger than it seems, though, since the year-ago period was boosted by a tax benefit.
The company doesn't offer up a wealth of product-line data (nor even a cash flow statement, unfortunately), but it did state that all divisions had growth, with Calvin Klein products leading the way.
Looking ahead, management said that it is actively looking to acquire new brands, but would consider some form of share repurchase if it can't find suitable targets for its cash. That's the good news / bad news situation for this company -- it's done well with brand acquisitions in the past, and I believe it'll continue to do well in the future. But it does highlight a dependence on external acquisition targets for future growth.
It will also remain to be seen what, if any, impact recent management turbulence will have on the business. The company's now-former CEO hadn't been in the position for long (and had been at the company for some 33 years) before recently resigning. Since I believe the company has a deep bench, I don't think it'll represent a major problem, but it's one of those things that makes you go "hmmm," at least briefly.
I've liked this company for a little while now, and it wouldn't surprise me if it still had some upside remaining-- even though it's trading at a pretty generous multiple relative to historical levels of P/E, price-to-sales, and such. Still, at this point I'd probably be a little more interested in some of Phillips-Van Heusen's customers, like Wal-Mart (NYSE:WMT) or Kohl's (NYSE:KSS), or other retailers like American Eagle Outfitters (NASDAQ:AEOS).
Fool contributor Stephen Simpson owns shares of American Eagle Outfitters, but has no financial interest in any other stocks mentioned (that means he's neither long nor short the shares).
