Buy to open the January 20, 2017 put on PVH with a strike price of $95 at $2.50 or lower. Symbol (PVH170120P95)

PVH, formerly known as Phillips Van Heusen, makes and sells apparel and accessories under the Calvin Klein, Tommy Hilfiger and Heritage brands. 

 While PVH will not report its next quarter until early December, so there is no rush to buy these puts, the stock may trade lower over the next month as apparel retailers and their suppliers warn of weak demand (the stock is lower today due to a soft outlook from Under Armour).

PVH has been a Wall Street darling due to its ability to sidestep the decline in revenue that has plagued many apparel makers. However, one-time boosts to revenue due to increased distribution of its Calvin Klein underwear and the purchase of the Asian Tommy Hilfiger distribution will end soon and growth rates will revert to low single digits.

1. PVH increased distribution of its Calving Klein underwear to Urban Outfitters and Amazon in the third quarter last year. It will be harder for the company to grow this business following the one time boost by adding new customers last year.
2. Although the company does not break out sales between the wholesale channel (department store customers) and sales via its own retail stores, it counts Macy’s, JC Penney and Kohls as large customers. All of these customers are suffering. Macy’s has announced it will close 100 stores in the next 6-12 months. Kohls’ announced last spring that for the first time in its history, it will begin closing stores. JC Penney has not been able to substantially improve sales and is still losing money.
3. PVH bought the 55% of the Tommy Hilfiger Asian license that had been owned by Apax Partners last February. This purchase gave a big boost to Tommy international revenue. My estimate is that Tommy international business is growing low single digits without the purchase. This lower rate of growth will be evident in the first part of 2017.
4. The company’s transfer of Tommy Hilfiger women’s business to G-III Apparel introduces some risk to revenue and earnings. Although G-III has been a reliable licencor of other brands, it recently was shell-shocked by a decline in demand from department stores.