PVH Corp has outlined further growth opportunities for its Tommy Hilfiger and Calvin Klein apparel businesses following its acquisition of The Warnaco Group last year.
Speaking at the 15th Annual ICR XChange Conference in Miami last week, chairman and CEO Emanuel Chirico said PVH plans to expand the Calvin Klein jeans label into sportswear and accessories. “To do it under the Calvin Klein label gives us a great advantage going forward,” Chirico added.
The New York-based company also aims to re-establish its leadership under the Calvin Klein Jeans banner in North America and Europe, while developing the Tommy Hilfiger brand in Asia and South America where Warnaco has an established operating platform.
“There is really a lot of strategic benefits that come from the transaction and really puts us in a position to grow both the two power-house brands on a balanced geographic basis with strong operating platforms in North America, Europe, in Asia and in South America,” Chirico said.
The key reason for the $2.9 billion Warnaco acquisition was to reunite the Calvin Klein brand, gain efficiencies and steer away from the licensor/licensee relationship, according to Chirico.
“From a size point of view, we’ll be one of the largest, most profitable apparel companies in the world,” he added.
By uniting the Calvin Klein apparel categories, PVH believes it can bring “significant benefits” to the jeans side of the business – particularly in Europe and North America, where the brand has previously struggled.
“We can enhance those businesses and make them better,” Chirico said.
PVH said the Tommy Hilfiger brand, which it acquired in 2010, is a “very healthy business” for the company. It sees significant opportunities for growth throughout Europe as well as continued growth between South America and Asia.
“Even in this difficult macro-economic environment that’s going on in Europe, the Tommy brand has continued to grow and continued to gain market share. I think it’s a combination of the strength of the brand and the operating platform that has been established,” Chirico said.
PVH recently entered into a joint venture with Brazil-based Inbrands to distribute Tommy Hilfiger branded products in the country.
Although Brazil represents less than 10% of the brand’s sales in South America, the market has “great potential”, Chirico emphasized.
“We believe that over the next five years, we can double the size of the Brazilian market with a continuation of growth in the denim business. While we’re adding on the sportswear business, both men’s and women’s really gives us a great growth vehicle there.”
Although PVH’s heritage brands are a low investment for the company, this business generates a substantial amount of cash, according to Chirico.
“It plays a strong role [and] allows us to invest profits back into the two growth brands,” he said.
The company’s heritage brands, which include Izod, Van Heusen, Bass and Arrow, saw third-quarter revenues reach $489.5 million.
This figure was down 7% on the same period the prior year after it was hit with a $50 million impact relating to the exit from the Izod women’s and Timberland wholesale sportswear businesses. Excluding the impact of these moves, however, revenue rose 3%.
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