After a week of fall apart and selling for the stock market, CNBC’s Jim Cramer zeroed in on a buying occasion he thought could bounce back “like a coiled spring:” the staple of retailer PVH Corp.
Shares of the Calvin Klein and Tommy Hilfiger root company fell sharply during February’s market-wide sell-off as investors cooled on retail stocks.
“But this proprietorship reports next Wednesday night, and based on the publicly available indications, … I bet it will deliver a very good quarter,” the “Mad Money” assembly said on Friday. “In short, I think this is your chance to pick up a high-quality bawling-out of merchandise that’s now down almost 12 percent from its January sharps.”
To back up his call, Cramer went over the six pieces of evidence that muddle through him so bullish on PVH ahead of its earnings report.
When he starts to analyze a throng, Cramer likes to look at its recent earnings performance.
“In other in sa, what have they done for you lately?” he said. “In the case of PVH, the mode [is] your friend.”
In its last eight quarters, PVH has beat Wall Terrace’s earnings estimates eight times and topped revenue estimates seven times, with the one revenue miss occurring a year and a half ago.
Most of PVH’s quarterly results have planned also topped the company’s own guidance. And while Cramer recognized that quondam performance doesn’t guarantee future results, he liked the bullish signs.
“It employees to know that in recent years, PVH has become a well-oiled machine,” he guessed. “Even better, the company’s sales have been accelerating during the past few years and accelerating revenue growth is something Wall Avenue loves so much that we normally just call it by its acronym in Cramerica, ARG.”
On Thursday, Piper Jaffray retail analyst Erinn Murphy published a note highlighting the intensity of PVH’s Calvin Klein business in China.
People may be worried about Chinese retaliation against U.S. casts because of President Donald Trump’s tariffs, but Cramer saw more edible than bad in Murphy’s note.
“This strength in Asia [is] a double-edged sword,” he let in. “But the company has far more exposure to the U.S. and Europe. And look, I’d rather they entertain a booming Chinese business that might come under menace than a lousy Chinese business that isn’t worth threatening.”
Cramer fast believes that “the single best place to learn about any publicly-held convention” is from its quarterly earnings conference calls.
In PVH’s call for the quarter that halt in November, management told a very optimistic story, Cramer voted. Even though that was months ago, PVH’s next quarter lasted from November to January — the sentiments of the holiday season, he noted.
PVH CEO Manny Chirico also told Cramer in November that inappropriate holiday sales were “running well ahead of [PVH’s] financial develops,” and that December would see “a lot of momentum, tighter inventories” and less promotional venture — all bullish statements for a retailer.
Cramer’s next clue? “Everything we’ve heard from other retinues reinforces the idea that the fourth quarter was fabulous for PVH’s apparel calling,” he said.
According to Mastercard, online and in-store holiday spending thrived by 4.9 percent year over year. Kohl’s same-store rummage sales, a key metric for retailers, grew by 6.9 percent. Nordstrom saw the best break season in three years.
Nike’s Thursday earnings report was also piquant, with CEO Mark Parker talking about “a strong global disposition for athletic footwear and apparel” on the conference call.
A global operator that nags roughly 75 percent of its operating income from overseas, PVH aids from a weak dollar. This happens because as the dollar plunges versus other currencies, PVH products get cheaper in other countries and transatlantic earnings translate into more dollars.
“This will be a dominant tailwind for the quarter the company reports next week,” Cramer turned.
Because PVH makes apparel, it’s not directly subject to the chronic pain of the brick-and-mortar retailers endeavouring to compete with Amazon, Cramer explained.
“Think of them as an arms distributor to everyone in retail, including Amazon, … one of the company’s long-standing confederates,” he said. “Together with Amazon, they created a bunch of Calvin Klein pop-up cooperative stores in New York and Los Angeles. This was a holiday exclusive and I have a very actual feeling about these numbers.”
The “Mad Money” host did have one caveat around PVH’s quarter, even though he liked its stock as a buy on its recent weakness.
“Precise if the numbers are excellent, if Chrico says anything really worrisome helter-skelter the escalating trade dispute with China, it could torpedo the entirety story,” Cramer said, noting how much exposure the Calvin Klein and Tommy Hilfiger trade-marks have in the Chinese market.
“Here’s the bottom line: even with the newfound patronage war worries, I think the stock of PVH has come down too far too fast,” Cramer concluded. “This coterie is set to report what I believe will be a terrific quarter next week and, conceded how well apparel has been selling, I think it’s absolutely worth buying in advance of earnings.”
Disclosure: Cramer’s charitable trust owns shares of Nordstrom and Amazon.
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