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Earnings Preview: PVH and Finish Line to Disappoint in Q4?

 

 

In anticipation of their Q4 earnings releases, analysts are buzzing about lowered expectations for PVH Corp. and Finish Line Inc. For Finish Line, much of the chatter has focused on the company losing ground to rivals like Foot Locker, while PVH is expected to take a hit from currency shifts due to its global presence.

PVH Corp.

The New York-based parent of Calvin Klein, Tommy Hilfiger and Heritage Brands turned in a better-than-expected performance in the previous quarter, posting revenue of $2.2 billion. Revenues were up 2 percent from the prior year’s Q3, excluding $67 million of revenue related to the Bass business, which was sold on the first day of the fourth quarter of 2013. Revenue decreased in Q3 from the prior-year quarter, including the Bass revenue.

GAAP earnings per share was $2.71, a 14 percent jump compared with $2.37 in the prior year’s third quarter.

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PVH joined the long list of American companies that have been hit my currency pressures. The company adjusted its FY 2015 guidance, citing unfavorable foreign exchange rates, mainly with the euro. PVH’s new EPS guidance is $7.25-$7.30, compared with previous guidance of $7.30-$7.40, each on a non-GAAP basis.

Finish Line Inc.

While maintaining that the company is not “out of the woods yet,” Susquehanna International Group analyst Christopher Svezia said he believes Finish Line can deliver improved performance in Q4.

“[Finish Line has not] fully wrapped its arms around several merchandising miscues, but we believe [comparable same-store sales] held up in the quarter ending in February,” Svezia said in a note this morning.

Sterne Agee analyst Sam Poser was less optimistic lowering his Q4 EPS estimate from 84 cents to 83 cents.

“4Q15 results are likely to be shaky,” said Poser in a note today. “[Same-store sales] may be okay (up 1 percent-2 percent), but margins will be terrible, or [same-store sales] will disappoint and margins will be okay. We may see disappointing [same-store sales] and disappointing margins.”

All of these potentially negative scenarios, according to Poser, stem from the “company’s management-centric” rather than “customer-centric” point of view about the overall business.

Finish Line said its net income for Q3, ended on Nov. 29, 2014, was $2.6 million, and net sales were up 9 percent, to $395.8 million, compared with the year-ago quarter.

 

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