PVH Corp (PVH) entered a definitive agreement to sell its Heritage Brands ARROW, Geoffrey Beene, IZOD, and Van Heusen to focus on global growth brands Calvin Klein and TOMMY HILFIGER. The company will sell those brands to Authentic Brands Group (ABG) for $220 million in cash. The transaction is expected to close in Q3 2021, following regulatory approvals. Consequently, the company has updated its full-year guidance.
Net proceeds from the transaction will be used for the repurchase of PVH shares. The company also reaffirmed plans to restore its dividend program. (See PVH stock chart on TipRanks)
PVH Corp’s CEO Stefan Larsson said it was a tough decision to exit the Heritage business because these brands were the foundation that built PVH as a leading fashion company.
Larsson stated, “This transaction reflects our commitment to driving our next chapter of sustainable, profitable growth – focused on the Calvin Klein and TOMMY HILFIGER brands, our international markets, driving product strength with increased pricing power and margin expansion, and winning in the marketplace through super-charging e-commerce.”
PVH will still continue to own its underwear and intimate businesses, including the Warner brand, which complement its neckwear and dress shirts business.
As a result of the sale, the company lowered its full guidance and now expects full-year revenue to increase by 22% to 24%, down from the initial forecast of 24% to 26% increase. On a Non-GAAP basis, full-year earnings per share are expected at $6.5, up from prior guidance of $5.5.
Wells Fargo analyst Ike Boruchow has reiterated a Hold rating on the stock but raised the price target to $110 from $90, implying a 2.1% upside potential from current levels. According to the analyst, the company continues to see solid growth overseas, with the U.S. improvement around the corner.
Boruchow stated, “Expect beat & raise story to continue, though 2H21 Street expectations likely to be revised downward. The print itself was not overly surprising, and we don’t believe bears nor bulls took much out of it.”
Consensus among analysts is a Moderate Buy based on 7 Buys, 6 Holds, and 1 Sell. The average analyst PVH price target of $119.08 implies 10.6% upside potential from current levels.
PVH scores 6 out of 10 on TipRanks’ Smart Score rating system, suggesting that the stock is likely to perform in line with market averages.
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