Company Description

Phillips-Van Heusen Corp. is a global designer and marketer of branded dress shirts, sportswear footwear, and other similar products. PVH has strong portfolio of brands including Calvin Klein , Izod, Bass, and DKNY. The company also holds key licenses to brands in the dress shirts, neckwear, and sportswear segments.

Fiscal Third-Quarter Results

In November, Phillips-Van Heusen announced revenue of $697.4 million, which was flat year-over-year. More important, the company earned $1.08 per share, beating the Zacks Consensus Estimate by $0.19 or 21.4%.

The company indicated that its business trends continued to improve in the third quarter, allowing PVH to top estimates.

This marked the fourth consecutive quarter that Phillips-Van Heusen beat consensus estimates. In those quarters, PVH topped the Zacks Consensus Estimate by an average of 21.4%.

Phillips-Van Heusen is scheuduled to release fourth-quarter results on March 23.

Hilfiger Acquisition

On March 15, PVH announced that was acquiring the Tommy Hilfiger brand for $3 billion in cash and stock, increasing PVH’s share of the menswear market in U.S. department stores.

Estimates Headed Higher

On Jan 11, PVH upped its earnings guidance for the fourth quarter from $0.38-$0.42 to $0.52-$0.45. This prompted analysts to increase their estimates.

In the last two months, the Zacks Consensus Estimate for 2010 is up 5 cents to $2.80, and the Zacks Consensus Estimate for 2011 is up 11 cents to $3.24.

However, the current consensus estimates do not reflect the Hilfiger acquisition.

PVH expects the Hilfiger deal to add $0.20 to $0.25 per share to its earnings this year and $0.75 to $1.00 per share next year. Management’s outlook suggests that consensus estimates are going to move much in the weeks and months ahead.

Zacks Investment Research

(PVH) Phillips-Van Heusen – Earnings Estimates Headed Higher

Company Description

Lululemon Athletica, Inc. designs, manufactures and sells athletic apparel for men and woman in the United States, Australia and Canada. The company sells its products through its own 100 plus stores and third-party distributors, has a market cap of $2.36 billion and was founded in 1998.

Third-Quarter Results

Lululemon’s last quarterly report from early Dec pleased the Street with results that were ahead of expectations. Sales were up 30% from last year to $113 million. Earnings came in at 20 cents, one penny better than the Zacks Consensus Estimate. Lululemon has been able to produce consistent results over the last year in a challenging consumer environment, surprising in all four quarters by an average of 20%.

The better than expected quarter was driven by same-store sales growth of 10% and the addition of 8 new stores opened since Q3 of 2008. The company is also seeing strong gains from its recent e-commerce initiatives, generating $4.2 million revenue during the quarter.

Margin Expansion

Lululemon has been complimenting its sales growth with cost management strategies and margin expansion, with Sales, General and Administrative costs down almost 2% from last year to 31.4% of revenue and gross profit increasing 180 basis points to 49.9% of revenue.

Strong Balance Sheet

In spite of Lululemon’s aggressive growth trajectory, the company has a pristine balance sheet, with $102 million in cash and equivalents and no debt.

Looking ahead, Lululemon plans to open 15 stores in 2010 with an eye on eventually scaling to 300 stores in key markets around the world.

Estimates Steady

Estimates have been mostly flat since the last round of revisions, with the current year pegged at 71 cents and the next-year estimate projecting 33% earnings growth.

Valuation

With all the enthusiasm surrounding the company, it’s share price doesn’t come cheap, trading with a forward P/E multiple of 47X, a steep premium to the overall market.

The Chart

LULU recently hit a new 52-week high at $33.98 after jumping above some short-term resistance at $32. Look for support in this area on a pullback.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service.

Zacks Investment Research

(LULU) Lululemon Athletica Incorporated – Margins Are Expanding

Hanesbrands faces intense competition in both domestic and international markets from other established players, including Berkshire Hathaway Inc. (BRKA and BRKB, through subsidiaries Russell Corp. and Fruit of the Loom Inc.), Nike Inc. (NKE), Adidas AG, Warnaco Group Inc. (WRC), Maidenform Brands Inc. (MFB) and Gildan Activewear Inc. (GIL).

Moreover, the company also competes with private label products of specialty retailers, such as Victoria’s Secret, Old Navy and Gap (GAP). Consequently, the company is under severe stress to maintain profitability.

The company’s balance sheet is highly levered, as indicated by a debt-to-capitalization ratio of 85.4% at the end of fourth quarter of 2009. The significant debt levels led to an outflow of $38.7 million or about 50% of operating income during the fourth quarter in net interest payments, which reduced the company’s overall profitability.

However, the company’s focus on continuous product innovation acts as a key differentiating factor in an industry characterized by frequent changes in customer preferences. The company has two design and product development facilities located in North Carolina and New York, which together employs a team of over 300 professionals.

Furthermore, Hanesbrands is in the midst of a multi-year global restructuring program aimed at reducing costs and boosting profitability. The program involves shifting production facilities to lower cost
locations in Asia, Central America and the Caribbean Basin, workforce reductions and consolidation of distribution centers. In addition, the company is undertaking prudent steps to optimize inventory levels in accordance with sales trends.

Hanesbrands Inc. engages in the design, manufacture, sourcing and sale of apparel essentials for men, women and children in the U.S. and internationally.

Zacks Investment Research

(HBI) Hanesbrands’ Analyst Downgrades to Neutral

Gildan has a good record of surpassing the Zacks Consensus Estimate in the recent past, evident from an earnings beat in 3 of 4 previous quarters with an average positive surprise of 7.6%, or 2 cents. Analysts, on average, are moderately positive on the company’s earnings for the fiscal 2010 second quarter, sending the Zacks Consensus Estimate up a penny over the past 2 months to 33 cents per share.

The Montreal-based company reported strong growth of 19.8% in fiscal first-quarter net sales to $220.4 million, compared to $184.0 million in the year-ago period. The growth was mainly driven by a 32.0% increase in activewear and underwear sales to $152.9 million due to higher volumes, increased market share in the U.S. wholesale distributor channel and lower inventory destocking by distributors. However, the top-line growth was partially offset by a 1.0% year-over-year decline in sales from socks to $67.5 million.

Gildan’s gross profit expanded by 68.9% to $65.7 million, while gross margin grew by 870 basis points (bps) to 29.8%. The expansion was primarily the result of management efforts to drive manufacturing efficiencies coupled with lower cotton and energy costs and more favorable activewear product-mix.

Selling, general and administrative expenses remained essentially flat at $33.5 million as unfavorable currency translations and higher compensation expense was offset by non-recurrence of provisions for doubtful accounts and lower legal and professional fees. Accordingly, operating income surged to $30.2 million from $4.5 million recorded in the year-ago period.

At the end of the quarter, Gildan had cash and cash equivalents of $141.1 million, compared to $14.4 million in the year-ago period. During the quarter, the company generated free cash flow of $42.5 million and deployed $34.0 million towards capital expenditure.

Moving forward, Gildan reiterated revenue guidance of more than $1.2 billion and gross margin of 26% during fiscal 2010. The company also stated that it now expects capital expenditure of $145 million in the fiscal, compared to earlier prediction of $130 million.

The Zacks Consensus Estimate for the fiscal year ending Sept 2010 is currently pegged at $1.40 per share, which moved up a penny over the past week as 1 of 14 covering analysts raised expectations. However, the most accurate estimate is bearish at $1.36 per share.

Zacks Investment Research

(GIL) Gildan Activewear’s First Quarter Tops Views

Company Description

Lululemon Athletica is a yoga clothing and equipment company based in Vancouver.

Revenues Up 30%

On Dec 9 lululemon reported quarterly results that included revenues of $113 million, a 30% increase since last year. The company also saw a solid 10% increase in same-store sales.

Income from operations jumped 60%, to $21 million, on higher revenues as well as better margins. Earnings per shares came out to 20 cents, topping the Zacks Consensus Estimate by a penny. The narrow beat was lululemon’s 6th consecutive earnings surprise.

Analysts React

Following the release the Zacks Consensus Estimate for fiscal 2010 and 2011 rose. The average estimate for 2010 is up 3 cents to 71 cents. Next year’s estimates rose 5 cents to 94 cents.

If these levels are met, lululemon’s year over year growth rates will be 18% and 33%, respectively.

The Chart

Shares off LULU have been selling off lately, but are just above a level of support. The stock could be turning around, making a great entry point.

Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service

Zacks Investment Research

(LULU) Lululemon Athletica – Income From Operations Jumped 60%

However, the company warned that results during fiscal fourth quarter is expected to reduce by 8 cents to 10 cents per share due to costs associated with the decision to assume direct control of Asia-Pacific operations from its licensee.

The warning has surprised investors as analysts, on average, were increasing earnings expectations for the quarter, sending the Zacks Consensus Estimate up by 3 cents over the past month to 78 cents per share. Shares of Polo Ralph Lauren have slipped more than 8% to $78.60 in Tuesday on the New York Stock Exchange.

Meanwhile, net revenues for the fiscal third quarter declined marginally by 0.6% year-over-year to $1.2 billion, primarily due to lower domestic and Japanese wholesale revenues, partially offset by higher same-store sales at Polo Ralph Lauren’s retail segment and favorable foreign currency translations.

Gross profit grew by 8.1% year-over-year to $723.7 million, while gross margins expanded 470 basis points (bps) to 58.2%. The growth was primarily driven by improved wholesale and retail segment margins, reduced merchandise markdowns and supply chain cost savings initiatives.

Total selling, general and operating expenses increased 9.6% to $551.2 million, mainly due to increased compensation expense and incremental business expansion costs. However, higher gross profit more than offset the increase in operating expenses. Consequently, operating profit rose by 3.5% to $172.5 million, while operating margin increased by 60 bps to 13.9%.

Polo Ralph Lauren ended the quarter with cash and cash equivalents of $973.8 million and long-term debt of $298.3 million. Capital expenditures in the second quarter amounted to $51 million and the company ended the quarter with inventory down 6.8% to $545.1 million from $585.1 million in the year-ago period. During the quarter, the company also deployed $78 million towards share buyback and currently has $352 million remaining under stock repurchase programs.

Polo Ralph Lauren revised its guidance for fiscal 2010. Management now expects fiscal 2010 net revenues to decrease in the low-single-digit range, compared to the earlier prediction of mid-single-digit decline. The Zacks Consensus Estimate on Polo Ralph Lauren’s earnings for the fiscal has moved up by 5 cents to $4.23 per share over the past month as 4 of 13 covering analysts raised expectations.

Zacks Investment Research

(RL) Ralph Lauren Corporation Beats Expectations – Issues Warning

Company Description

Oxford Industries is an apparel manufacturer which operates a large portfolio of owned and licensed brands such as Tommy Bahama, Ben Sherman, Billy London, Ely and Oxford Golf. It also operates retail stores and Internet sites under those brands and sells wholesale to national chains, specialty catalogs and department stores.

Oxford also holds exclusive licenses to produce and sell some items under the Kenneth Cole, Geoffrey Beene and Dockers labels.

Oxford Industries Surprised By 50% in the Third Quarter

On Dec 9, Oxford Industries reported its third quarter results and easily blew by the Zacks Consensus by 18 cents. Earnings per share were 27 cents compared to the Zacks Consensus of 18 cents but this was still under the 31 cents reported in the year ago quarter.

Sales also fell year over year to $200.5 million from $244.2 million in the third quarter of 2008. Inventory control was a big factor in the earnings surprise as it fell 23% as of Oct 31, 2009 compared to inventories as of Nov 1, 2008.

Additionally, the company saw some sales growth in the Tommy Bahamas retail stores in the months of September, October and November as well as better Internet sales which was encouraging even though overall sales in the brand were down compared to the year ago period. The wholesale environment continued to be difficult which dragged down the overall sales.

Raised Fiscal 2009 Guidance

Oxford Industries revised its guidance higher with earnings per share now expected to be between $1.20 to $1.25 up from the prior guidance of 90 cents to $1.05. Sales are forecast to be in the range of $790 million to $800 million which is higher than the prior forecast of $765 million to $800 million.

Given the revised guidance in December, the analysts also raised estimates to match. The fourth quarter Zacks Consensus rose 8 cents to 14 cents per share in the last 60 days.

The fiscal 2009 Zacks Consensus jumped 21.4% to $1.25 per share from $1.03 in the last 2 months.

Analysts are bullish about fiscal 2010 expecting 25.2% earnings growth. The Zacks Consensus climbed 31 cents to $1.57 per share in prior 2 months.

Value Fundamentals

Oxford Industries is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 2.8. The company also has a solid 5-year return on equity (ROE) of 12.51%.

Oxford Industries has also been rewarding shareholders with a dividend every single quarter since 1960. It currently yields 2.00%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Zacks Investment Research

(OXM) Oxford Industries – Surprised By 50% in the Third Quarter

The company is expecting fourth-quarter earnings to range between 52 and 54 cents per share.

Analysts polled by Zacks are calling for earnings of 54 cents, an increase of 10 cents from last week’s 44 cents.

For the full year, Phillips-Van Heusen is projecting an earnings range of $2.73 to $2.75 per share.

The Zacks Consensus Estimate stands at $2.75 for the current year, versus last week’s $2.65. For the following year, the Zacks Consensus Estimate of $3.13 per share climbed from $3.05.

Results for the fourth quarter and full year are scheduled for release on Mar 23.

Shares have been soaring. During the past year, PVH advanced by about 140%, while S&P 500 was up nearly 40%.

Zacks Investment Research

(PVH) Phillips-Van Heusen Corporation – Forecasts Jump

Company Description

G-III Apparel Group designs and manufactures a range of leather outerwear and accessories primarily in the United States. The company sells its products through its ownership of 120 Wilson Leather Outlet stores, but also has branding contracts with other retailers like Tommy Hilfiger, Coach and Kenneth Cole. G-III was founded in 1956 and has a market cap of $361 million.

You’d be hard pressed to find a smoother trend than GIII has been riding higher for most of the last nine months. Shares of GIII got an extra boost on Dec 2 when the company reported better than expected Q3 results.

Third-Quarter Results

Sales were up 3.4% from last year to $363.5 million. Earnings also came in strong at $1.87, 23 cents ahead of the Zacks Consensus Estimate. The company has surprised in each of the last 3 quarters by an average of 23%.

G-III’s gross margin expanded 200 basis points to 34%, while its cash position increased $9 million to $17 million.

An Optimistic View

The company was optimistic about its near-term prospects, with CEO Morris Goldfarb saying “in the short term, we expect a good finish to the fiscal year and a strong spring season for the first quarter of next year.”

Estimates Jump

Analysts agree with the positive view, with estimate jumping higher on the good quarter. The current year added 28 cents, now at $1.34. The next-year estimate is pegged at $1.56, a 17% growth projection.

Valuation

Based on the current-year estimate, this stock has a forward P/E of 16, in line with the overall market.

The Chart

Shares of GIII have had a great run over the last 9 months after bottoming out with the market in early March. More recently, shares have run into some short-term resistance at $22, take a look below.

Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Surprise Trader Service.

Zacks Investment Research

(GIII) G-III Apparel Group Ltd. – Optimistic Views

Company Description

Phillips-Van Heusen Corp. is a global designer and marketer of branded dress shirts, sportswear footwear and other similar products, offering several well-known brands. Calvin Klein , Izod, Bass and DKNY are just a few of the company’s brands.

The company grants licensing rights to its brands and holds key licenses to brands in the dress shirts, neckwear, and sportswear segments.

Higher Estimates on a Surging Share Price

The company continues to see bullish forecasts. Analysts polled by Zacks are calling for earnings of $3.05 for the current fiscal year, which represents 15% growth from last year’s projection.

For the fiscal year ending January 2010, the Zacks Consensus Estimate of $2.65 per share was increased from $2.46 over the past 3 months. For the following year, the projection of $3.05 per share jumped from $2.85 over the 3 months.

Shares of PVH more than quadrupled the market’s performance in 2009.

Strong Fundamentals

Phillips-Van Heusen’s return on equity (ROE) of 13% beats the industry’ average of 12%. The company’s net profit margin of 4% compares to a negative industry average. The Growth and Income pick offers an industry-leading dividend yield of 0.34%.

A Robust Third Quarter

Phillips-Van Heusen announced third-quarter results in mid-November. Earnings per share of $1.08 came in 21% ahead of the Zacks Consensus Estimate. Revenue of $697.4 million was relatively flat year-over-year. Management stated that the improvement in business trends the company experienced in the second quarter intensified during the third quarter and contributed to the surpassing of PVH’s previous revenue and earnings guidance.

Phillips-Van Heusen added that the global strength of the Calvin Klein brand was evident in the third quarter’s 9% growth in royalty revenue. Additionally, as consumers have demanded more and more value, PVH’s IZOD, ARROW and Van Heusen brands have also benefited.

Zacks Investment Research

(PVH) Phillips-Van Heusen Corporation – Higher Earnings Estimates on a Surging Share Price

Company Description

Polo Ralph Lauren Corporation designs, markets and distributes premium lifestyle products in four categories: apparel, home, accessories and fragrances.

The Company’s brand names include Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren Collection, Black Label, Blue Label, Lauren by Ralph Lauren, RRL, RLX, Rugby, Ralph Lauren Childrenswear, American Living, Chaps and Club Monaco.

Rewarding Shareholders

Polo Ralph Lauren recently upped its quarterly dividend to 10 cents per share, doubling the previous quarter’s payout. The dividend is payable on January 8 to shareholders of record at the close of business on December 24.

The company’s dividend yield of 0.5% is a competitive one in an industry that virtually offers no income.

Strong Results

The company posted fiscal second-quarter earnings of $1.80 per share, eclipsing the Zacks Consensus Estimate by 37% and outpacing last year’s $1.58.

Net revenues of $1.4 billion slipped 4% year-over-year .

“Our results have exceeded our expectations for the first half of the year, reflecting market share gains across products and regions and disciplined operational management,” said Roger Farah, President and Chief Operating Officer. “In the back half of Fiscal 2010, we will continue to invest in high growth international markets and exciting new product categories, both critical components of our long-term strategic objectives. We are raising our sales expectations for the remainder of the year, but we continue to be cautious with our outlook and are planning accordingly.”

Bullish Forecasts and Strong Momentum

For the fiscal year ending March 2010, the Zacks Consensus Estimate of $4.18 per share was increased from last month’s $4.12. For the following year, analysts polled by Zacks are pegging forecasts at $4.70 per share, compared to last month’s $4.65.

Shares of RL nearly quadrupled the market’s return over the past year.

Zacks Investment Research

(RL) Polo Ralph Lauren Corporation – Topped Consensus Estimate by 37%

This is the 5th straight month that the overall index has been in positive (over 50) territory.  In January of 2009, it was all the way down at 35.6. Seven of the 10 sub-indexes saw improvement, and eight of the ten are at of above the 50 mark. The only two that are below the mark are the ones that deal with inventories, and low inventories provide a potential snapback effect for the economy.

Key Sub-Indexes

The most forward-looking of the sub-indexes is the one for new orders, which rose 5.2 points to 65.5 from 60.3 in November. This is the 6th straight month that the new orders index has been above the 50 level.  Most of the improvement in the index in December came from fewer firms seeing a decline in new orders rather than from a surge of firms that were reporting higher new orders.

The production sub-index is probably the most important gauge of what is happening now. It rose to 61.8 from 59.9, a gain of 1.9 points, and marks the 7th straight month where the production index has been above 50. The employment index was positive for the third month in a row, which is a good omen for the employment report that is due out on Friday.

However, in November, the index was at 50.8 and the BLS still reported a decline in manufacturing jobs in November. In December it rose to 52.0, a gain of 1.2 points. We will see if that translates into higher actual new manufacturing jobs on Friday morning.

There are two sub-indexes which deal with inventories: one for the firms being surveyed, and the second dealing with their assessments of their customer’s inventory levels. Their own inventory levels are still going down, but are doing so at a slower rate, with an index reading of 43.4 vs. 41.3 in November.

This is the 44th straight month (almost 4 years!) that inventories have been contracting. Customer inventories have not been shriking as long, only 9 straight months, but they are contracting much faster.  The customer inventory index reading was just 35.0 down from 37.0 in November.

Inflation Entering the Discussion?

Prices, on the other hand, are rising with an index reading of 61.5 — a big 6.5 point jump from 55.0 in November. I think there is still enough slack in the economy that inflation should not be a problem in the near term, but numbers like that make me a bit nervous about it.

The backlog or orders index was also a little disconcerting. It fell to 50.0, a neutral reading from 52.0 in November. Yes, firms are getting new orders, but they are able to work them off right away, and thus they are not building up the backlog. New export orders are still expanding but at a slower rate, with a reading of 54.5 vs. 56.0 in November.

On the other hand, imports of materials rose with a reading of 55.0 vs. 51.5 in November. The combination of these two could indicate that we are going to see some deterioration in the net export numbers in the months to come.

Apparel Looking Good, Wood Products Soften

I consider the three most important of the three sub-indexes to be New Orders, Production and Employment.  One industry that is listed as being most positive in all three of these is Apparel, which probably means that there are some good things going on at firms like VF Corp (VFC) and Polo Ralph Lauren (RF).

On the other hand the wood products industry was listed as near the worst on all three of those indexes.  This means that things might be getting softer for the likes of International Paper (IP) and Weyerhaeuser (WY).

Overall, it was a very strong and encouraging report, and gets the new year off on the right foot when it comes to economic data.

Zacks Investment Research

(WY) Institute for Supply Management’s Manufacturing Index Rises

Company Description

Maidenform Brands sells intimate apparel at department stores and other retail outlets through a collection of recognizable brands including Maidenform, Lilyette, Control It!, and Sweet Nothings. The 86-year old company also produces the Donna Karan and DKNY licensed brands.

At the end of the third quarter, it had 76 Maidenform Brand retail outlet stores.

Sales Jumped 14.3% in the Third Quarter

On Nov 10, Maidenform reported third quarter results which surprised on the Zacks Consensus by 7 cents, or 20%. Earnings per share were 42 cents compared to 36 cents in the year ago period. The Zacks Consensus called for 35 cents.

Net sales rose 14.3% to $128.7 million as its core bra and shapewear businesses boosted the quarter. Shapewear sales soared 14.5%.

Maidenform also had success in new programs with off-price retailers and sales to specialty retailers even though retail sales fell 5.1% in the quarter.

2009 Guidance Raised

Maidenform is bullish about the rest of 2009. It expects sales to rise 3% to 6% for the fourth quarter compared to the year ago period. Retail is still expected to be soft, with sales down in the upper single digits.

Earnings per share for the fourth quarter are expected to be in the range of 17 cents to 21 cents compared to 10 cents in 2008. Maidenform is expected to report fourth quarter results on Mar 10, 2010.

The company expects 2009 earnings to be in the range of $1.16 to $1.20 up from its prior guidance of $1.10 to $1.16 per share.

The 2009 Zacks Consensus Estimate is right in the middle of the guidance range, at $1.18 per share, up from $1.12 per share 60 days ago.

Analysts are optimistic about 2010 as they expect to see 12.68% earnings growth.

Value Fundamentals

Maidenform Brands is a Zacks #1 Rank (strong buy) stock. The company has a forward P/E of 14.2 and a price-to-book ratio of 2.52. Maidenform has an outstanding 5-year average return on equity (ROE) of 33.31%.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service.

Zacks Investment Research

(MFB) Maidenform Brands, Inc. – Earnings Surprised 4 of 4 Quarters by 35.6%

The company reported a 7.1% decline in net sales to $301.7 million in the quarter, compared to $324.7 million in the year-ago quarter. The decline was mainly caused by a 4.8% decrease in activewear and underwear sales to $240.8 million due to lower unit selling prices and volumes as a result of sluggish economic conditions, special discounts and unfavorable currency translations. Furthermore, the company also recorded a 15.1% year-over-year reduction in socks to $60.9 million.

Gildan’s gross profit slipped 10.8% to $77.7 million, while gross margin fell by 110 basis points (bps) to 25.7%. The decline was mainly caused by a special discount to distributors and production downtime, partially offset by lower cotton and energy costs and favorable activewear product-mix. Selling, general and administrative expenses as a percentage of sales remained essentially flat at 11.3% as management’s efforts to improve efficiencies and favorable currency impact on expenses were offset by higher depreciation and increased provisions for doubtful accounts. Accordingly, operating income declined 12.5% year over year to $42.7 million, while operating margin dipped 90 bps to 14.2%.

At the end of the quarter, Gildan had cash and cash equivalents of $99.7 million, compared to $12.4 million in the year-ago quarter. During the quarter, the company deployed $88.0 million towards the repayment of long-term debt and $10.3 million towards capital expenditure.

Moving forward, Gildan anticipates a 25% growth in activewear and underwear volumes as well as about 5% hike in socks during fiscal 2010. Assuming an approximate 5% decline in selling prices and the impact of a higher proportion of underwear in the company’s product mix, net sales during the fiscal is expected to be slightly more than $1.2 billion, a growth of approximately 17% over fiscal 2009.

The Zacks Consensus Estimate for the fiscal year ending Sep 2010 is currently pegged at $1.36 per share, which has remained constant over the past 2 months. However, for the next fiscal, the Zacks Consensus Estimate, derived from 5 covering analysts, has moved down by 6 cents over the past month to $1.54 per share.

Zacks Investment Research

(GIL) Gildan Activewear Beats Estimates by a Penny

Management stated that the improvement in business trends the company experienced in the second quarter intensified during the third quarter and contributed to the surpassing of PVH’s previous revenue and earnings guidance.

Phillips-Van Heusen added that the global strength of the Calvin Klein brand was evident in the third quarter’s 9% growth in royalty revenue. Additionally, as consumers have demanded more and more value, PVH’s IZOD, ARROW and Van Heusen brands have also benefitted.

Bullish Forecasts

The company recently hiked its full-year earnings guidance to a range of $2.59 to $2.63 per share.

Analysts polled by Zacks are in agreement as evidenced by current full-year forecasts of $2.65 per share. Last month, analysts were projecting earnings of $2.49.

For the following year, the Zacks Consensus Estimate of $2.99 per share was revised upward from last month’s $2.91.

Alex Kolb is the Growth & Income Stock Strategist for Zacks.com. He also writes the popular daily commentary column for the ZacksElite.com service.

Zacks Investment Research

(PVH) Phillips-Van Heusen Corporation – Recently Hiked Full-Year Earnings Guidance

Company Description

Phillips-Van Heusen Corp. is a global designer and marketer of branded dress shirts, sportswear footwear and other similar products, offering several well-known brands. Calvin Klein , Izod, Bass and DKNY are just a few of the company’s brands.

The company grants licensing rights to its brands and holds key licenses to brands in the dress shirts, neckwear, and sportswear segments.

Higher Estimates on a Surging Share Price

Phillips-Van Heusen Corp. is seeing higher forecasts ahead of reporting third-quarter results next week. The full-year Zacks Consensus Estimate of $2.49 per share was increased from last month’s $2.46. The most accurate forecast is higher at $2.57.

For the following year, the Zacks Consensus Estimate of $2.88 per share was increased from last month’s $2.83. The most accurate projection of $3.04 is even more bullish.

For the third-quarter, analysts polled by Zacks are calling for earnings of 89 cents per share, up from last month’s 87 cents. The most accurate estimate of 93 cents is higher.

The third-quarter report is scheduled for release on November 19.

Shares, which are trading near a 52-week high, have outpaced the market by more than 100 over the past year.

Strong Fundamentals

Phillips-Van Heusen’s return on equity (ROE) of 13% beats the industry’ average of 10%. The company’s net profit margin of 2.8% compares to the industry’s 2.5%. The Growth and Income pick offers an industry-leading dividend yield of 0.35%.

Zacks Investment Research

(PVH) Phillips-Van Heusen Corporation – Higher Estimates on a Surging Share Price

The company plans to close a warehouse and distribution center in Martinsburg, West Virginia in Dec 2010 and shift its children wear distribution operations to Piedmont Triad. The decision is likely to affect approximately 100 employees. Ralph Lauren intends to offer either relocation packages to the retrenched employees or severance-related benefits.

The relocation of the facilities is primarily based on the decision to consolidate the distribution operations of the company. Ralph Lauren already has two facilities in High Point, a city in Piedmont Triad. These include a retail distribution center that was opened in 1991, and a 300,000 square feet distribution and facilitation center opened in 2008.

Ralph Lauren’s portfolio includes premier global brands that are universally recognized and are associated with distinct design, luxury and quality. The company has an integrated business model that is flexible and encompasses retail, wholesale and licensing businesses, enabling it to expand into new markets and shopping environments.

Zacks Investment Research

(RL) Polo Ralph Lauren Corporation Relocates to Piedmont Triad

Net sales for the quarter declined 3.4% year-over-year to $1.3 billion, primarily due to lower domestic wholesale sales, a reduction in same-store sales at the company’s retail segment and approximately 1% unfavorable impact of foreign currency translation. These were partially offset by the wholesale contribution of formerly licensed childrenswear and golf apparel products in Japan, and low single-digit currency growth in Europe.

Gross margins for the quarter expanded 189 basis points (bps) to 59.1% versus 57.3% in the comparable prior-year quarter. The increase was attributable to improved wholesale and retail segment margins, particularly in international markets, and supply chain cost savings initiatives. The operating margin for the quarter also expanded 89 bps to 18.5%, compared to 17.6% in the prior-year quarter.

The company ended the quarter with cash and cash equivalents of $423 million and has a long-term debt of $307.5 million. Capital expenditures in the second quarter amounted to $35 million and the company ended the quarter with inventory down 1% to $610 million from $619 million in the year-ago quarter.

During the quarter, the company opened 5 directly operated stores and closed 2 directly operated stores. At the end of the quarter, the company operated 328 stores with a total of approximately 2.5 million square feet, consistent with the prior-year period.

Based on the performance of the company in the second quarter, the company revised its guidance for fiscal 2010. Management now expects fiscal 2010 net revenues to decline in the mid-single-digit range, compared to the previous guidance of high-single-digit decline.

Management also provided guidance for the third quarter. Net revenues for the quarter are expected to decline in the low-single-digit range. The guidance includes flat-to-low single-digit comparable store sales growth for the retail segment.

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(RL) Polo Ralph Lauren Corporation Beats Consensus

Segmentwise, revenues in the Outdoor and Action Sports division were relatively flat, while that of the Sportswear and Contemporary Brands division reported 4% and 3% quarterly increase respectively, on a year-over-year comparison. Although revenues were down in the Jeanswear segment, it improved sequentially from the previous quarter with strong performance in the domestic markets. In the Imagewear segment, revenues were down due to high levels of unemployment and reduced consumer discretionary spending.

The International and Direct-to-Customer segments were the key long-term drivers of organic growth and healthy margin. Although the overall International revenues declined 2% during the quarter, revenues were up by as much as 32% in Asia. The Direct-to-Customer segment reported a 6% increase in revenues year over year.

Gross margins during the quarter were near record levels at 44.3%, while operating margins decreased marginally to 15.2% from 15.9% in the year-ago quarter. At quarter end, VF had a strong balance sheet with cash and cash equivalents of $379 million. Cash flow from operations was expected to reach $800 million by the end of the year, which was significantly higher than its previous expectations of $750 million. Inventories during the quarter reduced 13% year over year primarily due to prudent inventory management policies.

With stringent cost-control measures, reduced inventories, and continued focus on high-return investments, VF has revised its earnings guidance upwards at the higher end of its previous outlook for 2009. The company now anticipates earnings in the range of $4.85 to $5 per share. In addition, VF has increased its quarterly dividend by 2% to 60 cents per share, which represents the 37th consecutive year of higher dividends paid to the shareholders.

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(VFC) VF Corporation Misses by a Whisker

Company Description

Phillips-Van Heusen Corp is a global designer and marketer of branded dress shirts, sportswear footwear and other similar products, offering several well-known brands. Calvin Klein , Izod, Bass and DKNY are just a few of the company’s brands.

The company grants licensing rights to its brands and holds key licenses to brands in the dress shirts, neckwear, and sportswear segments.

Bullish Forecasts and Strong Momentum

Phillips-Van Heusen is seeing bullish forecasts. Analysts polled by Zacks are calling for earnings of $2.46 per share. Last month, the Zacks Consensus Estimate stood at $2.43 and was pegged at $2.31 two months ago.

For the following year, the Zacks Consensus Estimate of $2.73 per share was increased from last week’s $2.70 and last month’s $2.56.

Shares, which are trading near a 52-week high, have outpaced the market by about 15% since reporting second-quarter results. PVH more than doubled the market over the past year.

A Solid Quarter

Phillips-Van Heusen posted second-quarter results in mid-August. Earnings per share of 60 cents came in slightly below last year’s 66 cents but topped the Zack Consensus Estimate by 36%.

Revenue of $529.3 million came in above the company’s guidance but slipped by 1% year-over-year.

PVH noted that its wholesale and retail divisions performed better than planned, particularly the wholesale and retail sportswear businesses.

Comparable store sales of the retail divisions dipped 3% for the second quarter, which is a significant improvement from the first quarter’s drop of 8%.

Calvin Klein royalty revenue decreased 6% for the second quarter, which includes a $1.6 million negative impact from a stronger U.S. dollar. On a constant exchange rate basis, Calvin Klein royalty revenue fell 3%.

The company outpaced the market over the past year and surged past the S&P 500 by about 15% since announcing the second quarter.

Strong Fundamentals

Phillips-Van Heusen’s return on equity (ROE) of 13% beats the industry’ average of 10%. The company’s net profit margin of 3% compares favorably to a negative industry average. The Growth and Income pick offers an industry-leading dividend yield of 0.34%.

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($PVH) Phillips-Van Heusen Corporation – Bullish Forecasts and Strong Momentum

Earnings estimates remain at heightened levels from 2 months ago thanks to a healthy fiscal second-quarter report, announced on Sep 3.

Today, volume is at 194,000 shares, above the daily average of around 113,000.

In total, there are 6 companies from Textile-Apparel in today’s 219-stock Zacks #1 Rank List. Excluding GIII, the other 5 are Guess?, Inc. (GES), Jones Apparel Group, Inc. (JNY), Maidenform Brands, Inc. (MFB), Perry Ellis International, Inc. (PERY) and Phillips-Van Heusen Corporation (PVH). (PERY was featured yesterday as a Zacks #1 Rank Top Performer.)

Earnings Estimates

The Zacks Consensus Estimate for this fiscal year, ending January 2010, is $1.06 per share. That result has advanced by 6% from $1 over the past 2 months.

During its fiscal second-quarter report, GIII announced that it expects earnings per share between 95 cents and $1.05 per share for this fiscal year. It also expects sales of about $770 million.

The Zacks Consensus Estimate for next fiscal year, ending January 2011, has risen 8.6% in 2 months to $1.26 per share from $1.16. Furthermore, this guidance suggests year-over-year profit growth of nearly 19%.

Fiscal Second Quarter

GIII lost 17 cents per share in its fiscal second-quarter, which was narrower than both the year-ago loss of 23 cents and the Zacks Consensus Estimate at a loss of 26 cents. In fact, the company enjoyed a positive surprise of more than 34%; marking a second straight quarter with a better-than-expected result.

Sales gained 19.8% to $135.9 million from $113.5 million. The company saw strong results from its dress and sportswear businesses, and believes it is positioned well for the fall season in outerwear, dresses, sportswear and suits.

“Our inventory is in good shape and we expect a good second half performance in our wholesale business,” said Chairman/CEO Morris Goldfarb.

“Our licensed business, our company-owned brands and our private label programs are performing to expectations and we believe that our second half will once again demonstrate that we can produce good results even in a challenging environment,” continued Mr. Goldfarb.

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(GIII) Top Performer for Thurs: G-III Apparel- Zacks #1 Rank Top Performers

Polo Ralph introduced the Rugby brand in 2004 to primarily target young adults. The new application enables iPhone and iPod touch device users to personalize the Rugby line of shirts including varsity sweaters, rugby shirts, polo shirts and hooded sweatshirts. Customers can now add patches that feature numbers and letters on their shirts, and upload their photos with chosen hairstyles, skin tones and backgrounds.

The strategic move is aimed at utilizing popular networking sites to augment sales and establish direct communication with end users. Similar moves had already been taken by diverse companies such as Dell Inc. (DELL) and Starbucks Corp. (SBUX) to supplement sagging sales.

Polo Ralph Lauren designs, markets and distributes premium lifestyle products in four categories: apparel, home, accessories and fragrances. The company’s flagship brands include Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren Collection, Black Label, Blue Label, Lauren by Ralph Lauren, RRL, RLX, Rugby, Ralph Lauren Childrenswear, American Living, Chaps and Club Monaco.

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(RL) Polo Ralph Lauren Corporation Launches Custom Shirts

Company Description

Ralph Lauren Corp., together with its subsidiaries, designs and sells clothes and lifestyle products worldwide. The company was founded in 1967 and has a market cap of $6.48 billion.

As the economy shows signs of improving and consumers spring back to life, investors have anticipated an up tick in strong retail brands like Ralph Lauren. That and the company’s better than expected second-quarter results, reported on August 5, have helped push shares of RL back to within striking distance of the 52-week high.

Second-Quarter Results

Sales were down 8% from last to $1.02 billion, but earnings came in ahead of expectations at 76 cents per share, 27 cents better than the Zacks Consensus Estimate.

CEO Ralph Lauren said that the company’s distribution model and diversified product strategy that focuses on different customer segments has helped buoy its sales and drive profits.

Estimates Jump

After the solid quarter estimates jumped, with the current year adding 20 cents and advancing to $3.67 per share. The next-year estimate is up 31 cents to $4.15, a 13% growth projection.

Valuation

Based on the current-year estimate, this stock trades with a P/E multiple of 18X, in line with the overall market.

The Chart

Shares of RL have doubled since bottoming out in March just above $31, having recently topped off above $71. Take a look at the chart below.

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(RL) Polo Ralph Lauren Corporation

The company’s quarterly earnings excluding one-time items came in at 4 cents a share. While it comfortably surpassed the Zacks Consensus Estimate of one cent, earnings fell drastically from 18 cents reported in the prior-year quarter.

On a reported basis, Bebe delivered breakeven earnings, including employee acquisition and termination costs, asset write-downs and write-offs. Management expects earnings before write-offs to be between breakeven and a loss of 5 cents a share in the first quarter of fiscal 2010.

The slump in demand has prompted management to lower inventories, close stores and reduce wages to mitigate costs. Bebe closed eight stores in fiscal year 2009 and plans to close up to 13 more in fiscal year 2010.

The company’s sales continue to fall at an accelerating rate. After falling 10.5% and 15.8% in the second and third quarters of 2009, respectively, total revenue slid 24.1% to $130.2 million for the latest quarter from $171.5 million in the year-ago period. In line with revenue, same-store sales are also falling rapidly. Same-store sales declined 20.1% and 23.5% in the second and third quarters, respectively, and further to 29.6% in the fourth quarter versus 5.6% decline in the last year. However, management expects comps to ease up in the first quarter of fiscal year 2010.

Bebe also lowered its quarterly dividend by 50% to 2.5 cents from 5 cents. Capital expenditures for fiscal year 2010 are expected to be $20 million, down from $29 million in fiscal year 2009.

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(BEBE) Bebe Stores Beats Earnings Estimates

Earnings per share (excluding one-time items), which came in at 60 cents, well exceeded the company’s guidance range of 35 cents to 45 cents and surpassed the Zacks Consensus Estimate of 44 cents. However, EPS dipped 9.1% year over year, compared to 66 cents in the prior year quarter.

On a reported basis, Van Heusen posted EPS of 51 cents, down 8.9% from 56 cents in the year-ago quarter.

For the third quarter, management expects EPS in the range of 80 cents to 85 cents. Van Heusen has raised its earnings outlook for full year as it now expects EPS in the range of $2.30 to $2.40, up from a prior view of $2.05 to $2.30.

Consolidated revenues for the quarter under review slipped 5.6% to $529.3 million, compared to $561 million reported in the prior-year quarter. However, it surpassed the high-end range of the management’s guidance of $510 million to $520 million.

The wholesale and retail businesses performed above expectations, primarily the sportswear businesses. However, the total wholesale and retail revenue declined 5.1% year over year to $460.3 million. Calvin Klein total licensing revenues fell 10.0% to $65.7 million.

Same-store sales for Van Heusen’s retail divisions fell 3.0% compared to 2.0% decline in the year ago quarter. However, same-store sales improved substantially from an 8.0% decline in the first quarter.

For the third quarter, total revenues are projected in the range of $655 million to $665 million, or down 5.0% to 6.0% compared to the prior-year quarter. The company raised its total revenues forecast for the full year to between $2.32 billion and $2.34 billion, a decline of 2.0% to 3.0% year over year (compared to 3.0% to 4.0% decline predicted earlier).

To combat the downturn, management has been taking cost-cutting measures such as lowering headcounts, reducing excess stock and realigning the organizational structure. Management has also stopped the domestic production of machine-made neckwear and closed its Geoffrey Beene retail stores.

At the end of the quarter, Van Heusen had cash and cash equivalents of $369.6 million and long-term debt of $399.6 million, reflecting debt-to-capitalization ratio of 27.5%. Management expects to generate cash flow between $65 million and $75 million, after adjusting capital expenditure of $40 million.

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(PVH) Van Heusen Blows Past Q2 Estimates

Company Description

Maidenform Brands sells intimate apparel at department stores and other retail outlets through a collection of recognizable brands including Maidenform, Lilyette, Control It!, and Sweet Nothings. The company also licenses the Donna Karan and DKNY brands, which it launched in the first quarter.

Solid Results

The company recently announced second-quarter results, which included a sales jump of 5.6% year-over-year thanks to strong demand for the company’s bras and shapewear products. Earnings per share of 31 cents topped the Zacks Consensus Estimate by 24%.

Management said Maidenform stands out from the competition with leadership and innovation in bras and shapewear, adding that the company continues to build penetration across all channels of distribution. “While the marketplace and economy remain challenging, we’re deeply focused on executing our strategies and investing in our business and infrastructure to further strengthen our company and drive continued market share growth through the balance of this year and forward,” stated Chief Executive Officer Maurice S. Reznik.

Higher Projections

The company is bullish about the remainder of the year. Sales for the third quarter are expected to rise 12% to 16% over the year ago period. Earnings per share are expected in the range of 34 to 38 cents in the quarter.

The Zacks Consensus Estimate for the third quarter is currently at 35 cents, up a penny over the past week.

The company also raised its prior full-year EPS guidance to the range of $1.10 to $1.16 from $1.00 to $1.10.
The Zacks Consensus Estimate for 2009 is currently at $1.12, versus last week’s $1.05.

Strong Fundamentals

Maidenform Brands is attractively valued, trading with a forward P/E of 13.8. The company has a solid 1-year return on equity (ROE) of 20%, beating the industry average of 12%. Its net profit margin of 6% tops the industry average of 3%.

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(MFB) Maidenform Brands, Inc. – Earnings topped the consensus estimates by 24%

Crushed Estimates

On Jul 28 Carter’s reported second-quarter results that included a 5.4% increase in sales, to $318 million. Net income skyrocketed to $11.3 million, up from $2.8 million.

Earnings per share came in at 23 cents, more than 4 times the Zacks consensus estimate, which was 5 cents. This was the company’s third surprise in the past 4 quarters.

Analysts Raising Forecasts

Since the report analysts polled by Zacks have been raising their estimates. The consensus is now $1.66, up from $1.57 after 5 analysts have supplied 6 upward revisions. That is no typo, at least one analyst has raised twice.

These projections would yield a 20% growth rate this year and another 7% in 2010.

The Chart

After a few attempts shares of CRI surged past the level of resistance that was the former 52-week high. The stock has excellent momentum as well. Take a look below.

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(CRI) Carter’s Inc. – Aggressive Growth – Zacks Rank Buy

Bullish Forecasts

The Zacks Consensus Estimate for the current year stands at $2.30 per share is up a penny in just the past week and was increased by 12 cents over the past 90 days. The most accurate Zacks Consensus Estimate is more bullish at $2.40.

For the following year, the Zacks Consensus Estimate was bumped up to $2.55 per share from last week’s $2.53 and is 16 cents above the 3 months-ago level of $2.39. The most accurate Zacks Consensus Estimate is higher at $2.75.

Phillips-Van Heusen has watched the second-quarter Zacks Consensus Estimate climb from 41 cents per share to 44 cents over the past 3 months. The accurate projection is also hihger at 47 cents.

The company is scheduled to release results for the second quarter on August 19.

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(PVH) Phillips-Van Heusen – scheduled to release results for the second quarter on August 19

Company Description

Carter’s markets baby apparel and young children’s apparel in the United States. Carter’s products are offered in department stores and retail stores. The company sells products under the Tykes brand in Target stores and under its Child of Mine brand in Wal-Mart stores.

Doubles the Consensus

On Apr 28 the baby apparel maker releases fantastic first-quarter results that included a net sales increase of 8.1%, to $357 million. Carter’s saw solid growth in both its retail and wholesale segments.

The increase in sales yielded net income of $16.4 million, a 42% increase. After adjustments for one-time expenses earnings per shares were $0.38, topping Wall Street expectations by 22 cents. This was the company’s third surprise in the past 4 quarters.

Carter’s opened 7 new locations during the quarter, bringing the total for Carter’s stores to 260. The company has an additional 185 OshKosh stores.

Capitalizing on Value Shopping

In the press release the CEO, Michael D. Casey, said, “The trends in our business continue to be favorable, despite a very difficult retail market.” “In this economy, consumers are more cautious with their spending, and we believe that the compelling value and nature of our product offerings, combined with the investments we have made in product benefits, brand presentation, and retail store operations, give us a competitive advantage.”

Analysts React

Immediately following the report analysts began raising full-year guidance for the next two years. Current estimates are averaging $1.54 for 2009, up 15 cents since the announcement. The consensus for next year is $1.69, up 18 cents.

If met, these projections represent year-over-year growth of 11% and 10%, respectively.

The Chart

Shares of CRI have been bouncing off of the $20 level and it looks like a MACD cross over could be just days away. Take a look at the chart below.

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(CRI) Carter’s Inc. – Aggressive Growth – Zacks Rank Buy

Company Description

Maidenform Brands sells intimate apparel at department stores and other retail outlets through a collection of recognizable brands including Maidenform, Lilyette, Control It!, and Sweet Nothings. The 86-year old company recently launched the Donna Karan and DKNY licensed brands.

Sales Jumped 16.4% in the First Quarter

On May 13, Maidenform reported first-quarter earnings that surprised on analysts’ estimates by 52.94%. Earnings per share were 26 cents which was flat with the first quarter of 2008 but 9 cents higher than analysts’ estimates of 17 cents per share.

Net sales rose 16.4% to $114.2 million compared to the year ago period. The quarter saw growth in products using the Total Solution technology and in the launch of its Donna Karan and DKNY lines. Shapewear was hot, as sales surged 21.1%.

Department store sales lagged by 8.9% due to overall economic weakness in the department store sector. It also reflected lost sales associated with bankruptcy filings of retail partners.

Mass merchant sales climbed 29.7% due, in part, to the expansion of the Sweet Nothings brand in shapewear and bras.

Full-Year Guidance Raised

Forecasting earnings has been difficult for most companies over the past few months. Maidenform, however, is relatively optimistic going into the rest of 2009.

Sales for the second quarter are expected to be flat to higher in the low single digits compared to a year ago. The company forecast EPS in the range of 21 to 25 cents per share.

For the full year, sales are expected to rise in the low-single digits range for the second half of 2009 compared to a year ago. Full year sales are expected to grow by the mid-single digits.

Maidenform also raised its 2009 guidance to $1.00 to $1.10 from its prior forecast of 90 cents to $1.00 per share.

Consensus Estimates Rise

Since the big estimates surprise in mid-May, covering analysts have been moving to raise consensus estimates in line with the company’s guidance. Full-year consensus estimates are up 13 cents to $1.04 per share, with both of the 2 covering analysts raising in the last 30 days.

Value Fundamentals

Maidenform is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 11.02 and a price-to-book ratio of 2.24. The company also has an outstanding average 5-year return on equity (ROE) of 35.17%.

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(MFB) Maidenform Brands, Inc. – Value – Zacks Rank Buy

The company followed through with its prior plans to actually open stores in the fourth quarter, even as retail seemingly struggled, launching 19 Carter’s and 3 OshKosh retail stores, as well as closing one OshKosh retail store. Carter’s now operates 253 Carter’s and 165 OshKosh retail stores around the country.

Fourth Quarter 2008 Sales Jumped

Both of the company’s brands saw net sales increases in the quarter. Carter’s brand rose 9.0% while OshKosh gained 2.2%.

Retail store sales also jumped 12.8% to $213.2 million with Carter’s sales growing 16.1% to $130.9 million and OshKosh sales gaining 8% to $82.3 million. Both brands same comparable store sales increased with Carter’s rising 4.1% and OshKosh gaining 3.6%.

The company’s sales to Wal-Mart and Target also were strong in the quarter. The Child of Mine brand, sold in Wal-Marts, and the Just One Year brand, sold in Target stores, saw sales climb 16.4% to $63.8 million. The Just One Year brand saw the largest sales increase, of 29.3%, due to the launch of new products during the quarter.

Net income fell 4.4% to $27.3 million, or 47 cents per share, from $28.6 million, or 48 cents, in the year ago period. Earnings per share met analysts’ estimates.

2009 Consensus Estimates Rise

Covering analysts are bullish on Carter’s as 2 out of 5 analysts have raised 2009 estimates in the last 30 days, with 1 raising in just the last week. Consensus estimates are up 2 cents to $1.39 per share in the last 7 days.

Value Fundamentals

When we last reviewed Carter’s in Nov 2008 it was a Zacks #1 Rank (strong buy) stock. It is now a Zacks #2 Rank (buy) stock.

Its forward P/E is 12.05 and the price-to-book ratio is 2.39. Carter’s has an outstanding 1-year return on equity (ROE) of 20.02%. The company has surprised on estimates 3 out of the last 4 quarters.

Read the Nov 26, 2008 analysis.

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(CRI) Carter’s, Inc. – Value – Zacks Rank Buy

Yesterday, Under Armour (NYSE: UA) fell 16%. It’s dropped almost 30% over the past month. Today’s price of $18.25 getting close to the 52-week low of $16.05 it reached in November. And to add insult to (sports?) injury, original investors in the athletic wear company will note it’s well below what they paid in the 2005 IPO.

But while many analysts suggest this company may be a one trick pony – akin to Crocs, (Nasdaq: CROX). They couldn’t be more wrong. The reason its share price was penalized was that analysts were expecting $1.09 instead of the .79 reported.

This is a classic case of overreaction from a negative earnings report.

The fact of the matter is that this brand has developed a premium niche within the sportswear market, and it’s expanding that brand recognition to other areas.

Yes, there are numerous knock-offs of their breathable fabrics. And several competitors for the highly coveted retail space they occupy. But you have to hand it to UA. It was able to outmaneuver entrenched companies like Adidas AG (OTC: ADDYY) and Nike (NYSE: NKE). That wasn’t easy.

Under Armour’s integration into professional and college sports, has put its product into the hands of millions of athletes. From younger athletes see their sports idols wearing UA, to the armchair quarterbacks who want to do the same, its specialty sportswear has mass appeal. That brand dominance will allow it to keep its spot for the long haul.

It’s no surprise, really, that it’s being affected by the current economic downturn – like most other companies. But a few missed analyst estimates does not make a company un-investable – or unprofitable.

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(UA) Under ArmourGets Penalized by Analysts

Company Description

Carter’s, Inc. designs and sells apparel for babies and young children in the United States. The company was founded in 1865 and has a market cap. of $1.12 billion.

Solid Third-Quarter Results

Carter’s reported solid third-quarter results on Oct 21 that were ahead of analyst estimates. Revenue was up 6.2% to $436.4 million. Earnings came in at 60 cents per share, ahead of expectations by 12 cents.

Consistent Results

This was the third time in the last 3 quarters that Carters has surprised and beat analyst estimates, having done so by an average of 10 cents.

During the earnings call Carters noted that its mass channel sales, comprising of third-party distributors like Wal-Mart and Target, increased 13.4% to $76.7 million.

Estimates Holding Steady

At a time when many companies are struggling to remain profitable, analysts are mostly bullish on the company’s earnings projections. The current-year estimate is up to $1.36 per share from $1.24 60 days ago.

The next-year estimate has recently ticked lower, dropping 4 cents in the last month to $1.41 per share, but still a 4% earnings growth projection none the less.

Added to the SmallCap 600 Index

On Oct 28, Carter’s, Inc. was added to the S&P’s SmallCap 600 Index. This is beneficial because mutual fund managers that are tracking this index will need to purchase shares of the company in order to replicate its composition.

The Chart

Shares of CRI have been steadily advancing since bottoming out just above $12 in mid summer. More recently, this stock has launched a nice rally after rebounding from an up trend-line, moving to within striking distance of the short-term high just above $22. Take a look below.

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(CRI) Carters, Inc – third time in the last 3 quarters that Carters has surprised and beat analyst estimates

Company Description

Carter’s sells affordable apparel for babies and young children through 200 Carter’s and OshKosh retail stores and big box retailers throughout the United States.

The company, founded in 1865, specializes in products from newborn through size 7 including baby, sleepwear, play clothes and accessories in the Carter’s and Oshkosh brands.

Sales Rise 6.2% in the Third Quarter

On Oct 21, Carter’s Inc. reported third-quarter 2008 earnings that beat Wall Street estimates by 25%. Earnings per share were 60 cents compared to 58 cents per share in the third-quarter of 2007. Analysts expected 48 cents.

Sales rose 6.2% to $436.4 million. The Carter’s brand climbed 6.6% to $341 million and the OshKosh brand grew 4.8% to $95.4 million.

Retail store sales were also strong. Same store sales at Carter’s stores jumped 6.1% whereas OshKosh sales gained 13.2% for the quarter.

The company’s sales to other retailers, such as the Just One Year brand at Target and the Child of Mine brand at Wal-Mart, were equally as robust, rising 13.4% to $76.7 million.

The dismal outlook for the retail sector isn’t slowing down Carter’s. The company has plans to open 19 Carter’s and 3 OshKosh stores in the fourth quarter while intending to shutter only one Carter’s store during that period.

2008 Full-Year Consensus Estimates Rise

Given Carter’s bullish outlook heading into the fourth quarter, covering analysts have been raising full year estimates. In the last 30 days, 2008 consensus estimates jumped 6 cents to $1.36 per share.

Value Fundamentals

Carter’s is a Zacks #1 Rank (strong buy) stock. It’s trading at 12.1x forward earnings. The company’s price-to-book is 2.33. CRI has an outstanding 5-year return on equity (ROE) of 18.97%.

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(CRI) Carter’s, Inc – third-quarter 2008 earnings that beat Wall Street estimates by 25%

Company Description

G-III Apparel Group, Ltd. designs, manufactures, imports and markets an extensive range of leather & non-leather apparel including coats, jackets, pants, skirts & other sportswear items.

The company’s brands include Kenneth Cole, Calvin Klein, Dockers and many other well known names. G-III also has licenses with the NFL, NBA, MLB and several college sports programs. Company headquarters are in New York, where it employs over 700 people, and carries a market cap of nearly $200 million.

Sales Up 35%

On Sep 9 G-III announced quarterly sales of $113.5 million, up 35% year-over-year and the highest second quarter on company record.

The net result was a loss of 23 cents per share. While the loss was bigger than last years 5 cents per share, it was due to the acquisition of Andrew Marc businesses and Wilsons outlet chain.

Analysts were expecting a loss of 25 cents, good enough for the third consecutive earnings surprise. The loss is not atypical in such a cyclical industry.

The company also reiterated its full-year guidance, earnings of between $1.35 and $1.40 per share. Analysts are on the higher end with the consensus coming in at $1.39.

Growth Rates at a Bargain

Current estimates for the current year are $1.39, a 25% increase over fiscal 2008. Full-year 2010 estimates are averaging $1.59, 14% higher than 2009 projections.

Shares are trading at a nearly 7 times forward earnings. The PEG ratio is roughly 0.4, assuming a long-term growth rate of 17.5%.

The Chart

Shares of GIII have seen a rapid decline in the past few sessions and are now pressuring a level of support just under $12. Take a look at the chart below.

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(GIII) PEG ratio is roughly 0.4, assuming a long-term growth rate of 17.5%

Let the gains begin. Fortune also smiled upon stock markets, with the S&P 500 Index scoring its first back-to-back weekly gain since April as the US dollar rallied strongly and oil and commodities plummeted. The S&P 500’s gain since the low of July 15 has been 6.7%, with the Financial SPDR up by 27.8%.

Hat tip: Phil’s Stock World

As expected, the Federal Open Market Committee held the Fed funds target rate steady at 2.0%. This is the second straight meeting with no change in the rate. The committee’s statement discussed high inflation; although the FOMC expected inflation to decline in the months ahead, the members said “the inflation outlook remains highly uncertain”. The statement acknowledged both downside risks to growth and upside risks to inflation, indicating no near-term change in monetary policy. Click here for a comparison of the content of last week’s communiqué with that of the previous one (June 25), courtesy of Bill King (The King Report).

Casting light on the market situation, David Fuller (The King Report) said: “The obvious beneficiaries of weaker oil and a firmer US dollar are global stock markets. As the US has been The Rocky Horror Show in terms of concerns, it is now one of the more obvious candidates for a relief (short covering?) rally.”

To which GaveKal added: “Policy responses to the credit crunch have helped. To successfully get out of a financial squeeze you need three things: 1) a cheap currency, 2) a positive yield curve, and 3) the recapitalization of bank balance sheets. With surprising speed, all three of these conditions are now being met in the US.”

Next, a tag cloud of the text of all the articles I have read during the past week. This is a way of visualizing word frequencies at a glance. “Prices”, understandably, remained a key concern of commentators.

I believe there is still no confirmation that stock markets have bottomed and maintain that the convalescence period will be an extended affair. From a short-term perspective, however, I would give the upside the benefit of the doubt unless the lows established on 1) July 28 and 2) July 15 are broken.

Interestingly, assets in US money market funds have increased by 1.8% to $3.56 trillion since the mid-July stock market lows. Mulling through my head are the words of the late Sir John Templeton: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.” It’s best to keep an open mind about matters.

Before highlighting some thought-provoking news items and quotes from market commentators, let’s briefly review the financial markets’ movements on the basis of economic statistics and a performance round-up.

Economy
“Global business sentiment remains weak and fragile,” according to the Survey of Business Confidence of the World conducted by Moody’s Economy.com. The survey results suggest that the global economy is skirting recession, but just barely.

Economic reports released in the US during the past week were mixed and included the following:

• Personal income inched up 0.1% in June after soaring 1.8% in May. Excluding the tax rebate effect, personal income rose by 0.3% in June, up from 0.4% in May. Spending growth slipped to 0.6% from 0.8% the prior month. Real spending fell by 0.2% as prices soared. The core PCE deflator rose by 0.3%, the fastest since September, while the top-line deflator jumped 0.8%.

• The ISM non-manufacturing index came in slightly better than expected in July. However, a decline in new orders and new export orders signaled weaker activity in the non-manufacturing economy in the months ahead.

• Initial claims for unemployment insurance benefits increased 7,000 to 455,000 for the week ended August 2. Although expectations had been for claims to remain high, this figure exceeded them.

• Friday’s productivity and costs numbers came in worse than expected on the productivity side but better than expected on the cost side.

On Thursday, the European Central Bank (ECB) left interest rates on hold at 4.25% and stated that risks to economic growth were starting to materialize. Victoria Marklew (Northern Trust) commented: “Eurozone GDP almost certainly contracted in Q2 – Eurostat will release its flash estimate on August 14, the same day that Germany and France release their own first estimates. If the numbers surprise on the downside, the markets will start anticipating a rate cut by the ECB on September 4.”

“Europe has moved further along the road towards a recession than the US. The economic data of the past two weeks make that conclusion hard to avoid,” reported John Authers in the Financial Times.

In line with market expectations, the Bank of England also decided to keep its key repo rate steady at 5.0% at its August monetary policy meeting last week. August marks the fifth consecutive month with no change in the repo rate. UK house prices fell by almost 11% in the year to July – one of the biggest year-on-year falls recorded in the UK – prompting BCA Research to say: “The BoE will cut aggressively before year end.”

Further afield, according to the Financial Times, the Japanese government conceded on Wednesday that the country’s longest postwar period of economic expansion might be over as it reported a drop in its key measure of underlying economic conditions for June.

WEEK’S ECONOMIC REPORTS

Source: Yahoo Finance, August 8, 2008.

Next week’s economic highlights in the US, courtesy of Northern Trust, include the following:

1. International Trade (August 12): The trade deficit is predicted to have widened to $61.5 billion in June from $59.7 billion in May, with the oil import bill showing a noticeable increase. Consensus: $59.5 billion.

2. Retail Sales (August 13): Auto sales fell sharply to 12.55 million units in July. Non-auto retail sales were soft. The decline in gasoline prices in July should trim back the headline reading. Consensus: 0.0% versus 0.1% in June; non-auto retail sales: 0.5% versus 0.8% in June.

3. Consumer Price Index (August 14): A 0.4% increase in the CPI is predicted for July after a 1.1% jump in June. The core CPI is expected to have moved up 0.2% versus a 0.3% increase in June. Consensus: +0.3%; core CPI +0.2%.

4. Industrial production (August 15): The 0.1% drop in the manufacturing man-hours index in July points to a drop in industrial production. The operating rate is projected to have declined to 79.8% in July, the lowest since September 2005, excluding the 79.6% rate in May 2008. Factory production had declined for three straight quarters, with the 3.7% annualized drop in the second quarter the largest since the fourth quarter of 2001. Consensus: -0.1%; Capacity Utilization 79.8% versus 79.9% in June.

5. Other reports: NFIB Survey (August 12), Inventories (August 13), Consumer Sentiment Index (August 15).

Click here for a summary of Merrill Lynch’s US economic and interest rate forecasts.

A summary of the release dates of economic reports in the UK, Eurozone, Japan and China is provided here. It is important to keep an eye on growth trends in these economies for clues on, among others, which way the US dollar is going to move and how strongly.

Markets
The performance chart obtained from the Wall Street Journal Online shows how different global markets performed during the past week.

Source: Wall Street Journal Online, August 10, 2008.

Equities
Developed stock markets, in general, soared during the past week, with gains in excess of 2.5% being the order of the day. As was the case during the previous week, the Japanese Nikkei 225 Average was the worst performer among mature markets, rising by a relatively modest 0.6%.

The emerging markets category, as a group, underperformed developed markets, with Russia (-11.3%), China (-7.0% – a 19-month low) Turkey ( 4.7%) and Hong Kong (-4.32%) leading the declines. On the other side of the scale, the Indian BSE 30 Sensex Index (+3.5%) scored a fifth successive weekly gain. The Philippines (+4.2%) and Taiwan (+3.0%) also delivered solid returns.

Interestingly, the MSCI World Index has been outperforming the MSCI Emerging Markets Index since the stock market peaks of the middle of May, gaining 4.0% in relative performance on the back of perceived increased risks in developing markets.

The US stock markets moved strongly higher, especially on Wednesday and Friday when the Dow Jones Industrial Index recorded gains in excess of 300 points. The major index movements were: Dow Jones +3.6% (YTD -11.5%), S&P 500 Index +2.9% (YTD -11.7%), Nasdaq Composite Index +4.5% (YTD 9.0%) and Russell 2000 Index +2.5% (YTD -4.1%).

It is noteworthy that the Dow Jones, Nasdaq Composite and Russell 2000 have all crept back to above their 50-day moving averages, with the S&P 500 closing the week a mere 1 point below. The Russell 2000 also managed to penetrate the key 200-day line – often used as an indicator of the primary trend.

Click here or on the thumbnail below for a market map, courtesy of Finviz.com, providing a quick overview of the performance of the various segments of the S&P 500 Index over the week.

The apparel & accessory group outperformed last week, gaining 16%. Polo Ralph Lauren (RL) and Jones Apparel (JNY) reported earnings that handsomely beat the consensus estimates. Coach (COH), the largest member of the group, rose by 20% on the back of Coach’s CEO increasing his holdings in the company’s stock.

The casino & gaming group (+14%) was also among the top performers. Its single member, International Game Technology (IGT), reported that it had repurchased 3% of the company’s outstanding shares since the end of June.

Stocks related to the energy sector (-4.6%) and materials sector (-3.0%) were at the bottom end of the week’s performance table.

The thrifts & mortgage finance group was the worst-performing group for the week, down by 12%. The two largest members of the group, Fannie Mae (FNM) and Freddie Mac (FRE), both reported losses in excess of the analyst consensus estimates as they continue to be negatively affected by the housing decline and mortgage-related credit problems.

In other corporate news, Citigroup (C) and UBS (UBS) agreed to settle allegations of misrepresentation in the marketing of auction-rate securities. Separately, Moody’s indicated that it had placed American Express’ (AXP) A1 rating on review for a downgrade.

Fixed-interest instruments
UK, Eurozone and Japanese government bond yields declined during the past week as the economic outlook for those parts of the world worsened.

The UK ten-year Gilt yield declined by 17 basis points to 4.68%, the German ten-year Bund yield by 7 basis points to 4.26% and the Japanese ten-year bond yield by 4 basis points to 1.47%. The ten-year US Treasury Note, however, was almost unchanged at 1 basis point higher, closing at 3.95%.

US mortgage rates rose, with the 15-year fixed rate and the 5-year ARM both 7 basis points higher at 6.08% and 6.06% respectively.

Credit market stress was almost unchanged in the US, but worsened in Europe as reflected by the spread of the Markit iTraxx Europe Crossover Index widening from 531 to 563.

Source: Markit/Creditex

Currencies
The US dollar surged following an acknowledgment of weakening growth in the Eurozone by ECB President Trichet, prompting traders to think the ECB would not be hiking rates further to fight inflation.

The US Dollar Index now trades above its 50-day and 200-day moving averages, signaling a breakout from its five-month trading range.

The greenback rose against the euro (+3.2% – a five-month high), the British pound (+2.9% – a 20-month peak), the Swiss franc (+3.0%), the Japanese yen (+2.2%) and the Canadian dollar (+3.7%).

The Australian dollar (-3.9%) and New Zealand dollar (-3.1%) also lost badly against their US namesake as a result of slowing economic growth pointing to interest rate cuts.

Commodities
The dollar’s rally and growing concerns of slowing demand knocked down dollar-denominated commodity prices as seen in the Reuters/Jeffries CRB Index plunging by 7.4%.

Crude oil, understandably, received the most attention in the commodity sell-off given its strong link to the economy. The price of West Texas Intermediate crude dropped by 7.9% for the week to $115.20 a barrel, i.e. a decline of 20.9% since its high on July 11.

Precious metals remained out of favor, with silver down 12.5%, platinum 5.9% and gold bullion 5.6%. The yellow metal dropped to a three-month low, falling below its 200-day moving average. Among base metals, copper declined by 6.9%.

As far as agricultural commodities were concerned, an expected reassurance from the US Department of Agriculture on the outlook for this year’s harvest caused corn to nosedive 11.8%, soyabeans 12.0% and wheat 2.8%.

The chart below shows the past week’s damage for the various commodities.

Source: StockCharts.com

Now for a few news items and some words and charts from the investment wise that will hopefully assist with our preparation to achieve investment success. It is a prerequisite for success at the Beijing Olympics that athletes be extraordinarily well prepared. Likewise with managing our investments.

Source: Slate

Financial Times: Beijing Olympics in perspective
John Authers discusses the market implications of the Beijing Olympics.

Source: John Authers, Financial Times, August 8, 2008.

Financial Times: A year in a tin hat – one-year anniversary of the credit crunch
FT Alphaville’s Paul Murphy narrates a short guide to the 12 months of the credit crunch.

Source: Financial Times, August 5, 2008.

CNBC: Faber says US economy in recession; “long” on dollar
“Investor Marc Faber, publisher of the Gloom, Boom & Doom Report, talks with Bloomberg about the euro’s performance against the US dollar, the commodities market and the global economy. The euro fell the most in almost eight years against the dollar as traders pared bets the European Central Bank will raise interest rates as the economy slows.”

Source: CNBC, August 8, 2008.

CNBC: Hugh Hendry (Eclectica Asset Management) – the state of the market and opportunities

Source: CNBC, August 1, 2008.

(more…)

View original at: Investment Postcards from Cape Town

(RL) Words from the (investment) wise for the week that was (Aug 4 – 10, 2008)