Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Ralph Lauren Corp (RL), PVH Corp (PVH), Fifth & Pacific Companies Inc (FNP): Comparing Investment Options

Ralph Lauren is more attractive in two areas. First, its net margin (the percentage of revenue dollars it turns into profits) is considerably higher, at 10.54% versus 4.88% for PVH Corp (NYSE:PVH). Ralph Lauren management has been more effective at keeping costs low. Second, its dividend currently yields 0.90%, versus 0.10% for PVH. Ralph Lauren should continue to outperform PVH in the dividend area thanks to its stellar balance sheet: $1.25 million cash/$271 million in long-term debt. PVH Corp (NYSE:PVH) isn’t as impressive: $746 million cash/$4.48 billion long-term debt.

If you’re looking for a long-term investment, they’re both likely to be winners. That said, it’s important to note that both stocks plummeted more than 50% during the market crash of 2008-2009. If you’re concerned about the broader market’s ability to remain afloat, you won’t find much resiliency here.

A much easier comparison is Ralph Lauren versus Fifth & Pacific Companies Inc (NYSE:FNP). The latter (formerly Liz Claiborne) has a market cap of $3.02 billion, making it a much smaller company than Ralph Lauren Corp (NYSE:RL), with a market cap of $15.40 billion. Sometimes smaller companies make better investments, but that’s not likely to be the case here.

While Ralph Lauren has seen stock appreciation of 112% over the past three years, Fifth & Pacific Companies Inc (NYSE:FNP) has appreciated 435%. But this stemmed from Fifth & Pacific Companies Inc (NYSE:FNP)’s stock losing more than 75% of its value in 2008/2009. Therefore, it had more upside potential from the bottom. Plus, smaller-cap stocks tend to move faster (in either direction).

Fifth & Pacific Companies Inc (NYSE:FNP) offers several well-known brands, including Juicy Couture, Kate Spade New York, Jack Spade, and Lucky Brand. But unlike Ralph Lauren, Fifth & Pacific has had difficulty growing its top line and delivering profits.

Fifth & Pacific:

2008 2009 2010 2011 2012
Revenue (in billions) $3.99 $3.01 $2.50 $1.52 $1.51
Diluted EPS ($10.17) ($3.26) ($2.67) ($1.35) ($0.68)

Yes, the losses are narrowing, but whether this trend is capable of moving into profitable territory and sustaining and upward move is questionable. Fifth & Pacific Companies Inc (NYSE:FNP) hasn’t been able to overcome declining consumer demand, but it has managed to cut costs in order to aid the bottom line.  

Fifth & Pacific sports a net negative net margin of (3.56%), and it’s trading at 60 times earnings, making it wildly expensive compared to Ralph Lauren and PVH, which trade at 17 and 16 times earnings, respectively. Fifth & Pacific Companies Inc (NYSE:FNP) also doesn’t pay a dividend. While Fifth & Pacific might make a decent speculative trade, it’s not likely to outperform Ralph Lauren or PVH Corp (NYSE:PVH) over the long haul.

Conclusion

As stated above, Ralph Lauren Corp (NYSE:RL) is likely to be a good long-term investment. But macroeconomic trends, combined with managements’ concern about consumers’ willingness to spend, lead me to believe that now isn’t likely an ideal entry point. That said, keep Ralph Lauren on your watch list and consider buying in if the stock suffers in the future — albeit only after investors have stopped selling it off.

The article A Top-Tier Apparel Stock Fighting Macro Trends originally appeared on Fool.com and is written by Dan Moskowitz.

Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.