An apparel stock with brands, brains
Phillips-Van Heusen has the strong names and clever management needed to overcome rising raw costs.
Last night, I spoke with the always fabulous Manny Chirico, who delivered an oh-so-solid quarter in the face of all of the headwinds that felled Nike. But unlike Nike, PVH made some changes to fabric, sourced better -- in less expensive countries than China -- and raised prices for its best stuff, notably Tommy Hilfiger.
What happened? Sales went up, but costs held steady. That gave PVH the confidence to raise its guidance for the full year (even though the current quarter wasn't raised because of some one-off promotions) and made me feel that PVH, like VF Corp. (VFC) and Polo Ralph Lauren (RL), is in charge of its destiny.
As we deal with this new, inflation-ridden world, we are going to have to put everything through the prism of whether the brands are good enough and the management clever and proactive enough to dodge the raw-cost bullet.
We just need to be mindful of who has the smarts and the brands to beat it. What took my breath away about Nike's awful quarter, which led to a lot of estimate cuts for footwear and apparel, is that Nike certainly had the brands. But it didn't have the smarts. It was like the company decided to ride out the tide of raw costs without worry.
Nike has since put through some small price increases, but not enough to do the job. It's a lukewarm hold and a buy only if it goes to the low 70s.
But PVH? I think it works right here.
At the time of publication, Cramer had no positions in the stocks mentioned.
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