- the re-emergence of old-school conviction in the stock market; and
- how the Warnaco acquisition hurt PVH's earnings.
Old-School Conviction Is Coming Back Posted at 7:35 p.m. EDT on Thursday, March 28 You have to marvel at what just transpired this quarter. This was the single most triumphant quarter for so many different kinds of stocks that I can recall since the 1990s. And yet when I read and listen, it is the same old, same old -- cautious bulls worried about Europe, worried about China, worried about sequestration, worried about earnings, worried about Washington. You can truly say that the last 13 years really did a number on us. In fact, the only time I can recall hearing someone say, "Look, I like these stocks and they must be bought" was today on "Halftime Report," when Laszlo Birinyi just told it like it is and rattled off Johnson & Johnson ( JNJ), Priceline.com ( PCLN), Amazon.com ( AMZN), Sears Holdings ( SHLD) and a couple of others and said these are going higher. What happened to people like Birinyi? What happened to people with conviction? How did everyone decide that what matters is Slovenia or the chart or Washington or any host of things other than the company?
Tonight I had the good fortune to interview Fred Hassan, who just penned Reinvent, a book that was spawned by the hard lessons of the man who had turned around more businesses successfully than anyone alive. We talked about the importance of leadership, of culture, of the CEO and how much the CEO can mean to the stock price. Between Hassan and Birinyi, I felt totally old school. Otherwise it's all about risk-on, record-high territory, BlackBerry ( BBRY) and Apple ( AAPL). Let this quarter be a lesson. The times, they have a changed. Old school is coming back. Stocks matter. CEOs matter. Slovenia? It only matters as to how to get a better price for Bristol-Myers Squibb ( BMY). Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL, JNJ and BMY.
Calvins Get Between PVH and Profit Posted at 7:15 a.m. EDT on Thursday, March 28 Darned earnings, they can really screw it up, can't they? Last night, PVH Corp. ( PVH), one of my absolute favorite companies, lowered the boom on 2013. The culprit? A new acquisition, Warnaco, failed to meet the targets that PVH set when the acquisition closed. So a buck-fifty-two goes to a buck-thirty-three for the quarter, and seven-forty-six goes to seven bucks. Thud. This was a tough one. I know I was hoping for better because I thought that the Warnaco acquisition that closed in February, bringing in the remaining Calvin Klein brands that were not held by PVH, would go smoothly for the company, the way the Tommy Hilfiger acquisition did several years ago. That was wrong. As Manny Chirico, the terrific CEO at PVH, told me last night, many of the Calvin Klein business lines just weren't doing that well, particularly jeans in the U.S., Europe and Korea, the latter being especially weak. Consequently, instead of the synergies, the guide-ups, and the accretions, we got the dreaded word, dilution, 25-cents worth, and a reset. In short, 2013's no longer a growth year for PVH. Now it is an investment year. And if jeans stay weak, an investment year could mean even less growth than Manny's telegraphing now. In other words, we don't know whether the 25 cents of dilution captures the entire weakness. That's the bad news. The good news is that once you ratchet things down and shake out all those who thought this deal would be accretive from the get-go, you might have a decent second-half investment. I would say that you might have a good trade today -- down 5% to 7% -- but enough analysts will be surprised by the sudden inconsistency of this smoothly running operation that the stock has to lay low and repair for a bit. Fortunately, for Manny and the stock, the analysts at J.P. Morgan and Wells Fargo nailed the progression here -- or the regression, depending upon how you feel -- and had softened the beach for the miss. Hats off to J.P. Morgan's Matthew Boss and Wells Fargo's Evren Kopelman for nailing the problems ahead of the quarter. Going into the number, I had thought they were being overly cautious. They were just being right. Very good research.