Shareholders of Phillips-Van Heusen voted on Thursday to shorten the name of the company to the acronym PVH Corp. at its annual meeting here. The aim of the change is to reflect the importance of its newer Tommy Hilfiger and Calvin Klein businesses — and its smaller dependence on the heritage dress shirt business, which includes Van Heusen, Arrow and Geoffrey Beene.
“The Phillips-Van Heusen name didn’t represent where the company is headed and where the growth is coming from,” said, chairman and chief executive officer of PVH. Calvin Klein and Tommy Hilfiger represent more than 75 percent of the company’s revenues and profits.
With the deal for Tommy Hilfiger finalized in May 2010, PVH is already on the hunt for another acquisition. “We are looking in earnest for acquisitions that make sense going into 2012,” Chirico told shareholders. Those acquisitions will likely include another global lifestyle brand, Chirico told WWD, as well as buying back licensed Tommy Hilfiger or Calvin Klein businesses, either in certain product categories or in geographic areas.
The company has paid down $400 million of debt on the Hilfiger acquisition and plans to pay off another $300 million by the end of the fiscal year, deleveraging its balance sheet to make other potential deals possible.
On a pro forma basis, PVH in 2010 had $5.3 billion in revenues, making it the third largest apparel firm globally after VF Corp. and Polo Ralph Lauren Corp.
Its three businesses combined gave PVH global retail sales of $14.6 billion. Tommy Hilfiger, at $4.6 billion in global sales, accounted for 49 percent of the revenue base, with 44 percent of the business in Europe and 36 percent in North America. Calvin Klein, at $6.7 billion, represented 18 percent of total revenue — smaller than Hilfiger due its reliance on a licensing model — with 25 percent of the business in Europe and 51 percent in North America. Heritage brands, including Izod and G.H. Bass & Co., at $3.3 billion, were 33 percent of total revenues, with 86 percent of the business in North America.
PVH now commands a 47 percent share of dress shirts in U.S. department and chain stores, including nine of the top 10 brands (Polo Ralph Lauren is the exception). In neckwear, its market share is more than 50 percent of all ties sold in the U.S.
Unlike in previous annual meetings, both Tom Murry, ceo of Calvin Klein Inc., and Fred Gehring, ceo of Tommy Hilfiger Group, addressed shareholders with overviews of their respective units.
Murry said the current plan is to grow global retail sales of the Calvin business to $9 billion by 2014. For the same time period, Gehring said his business is expected to grow globally to $6.5 billion.
For fiscal year 2011, PVH is projecting revenue between $5.7 billion and $5.75 billion, with earnings per share at $4.80 to $5.00, excluding special items.
The company ended its licensed Timberland sportswear business in the fourth quarter of last year. “Given the acquisition of Tommy Hilfiger, we decided to close a marginally profitable business of about $90 million,” he noted. PVH’s competitor VF Corp. recently revealed plans to acquire Timberland.
As with all apparel companies, rising production costs are a key issue for PVH. “You look for all the efficiencies you possibly can, including counter-sourcing and moving production to new countries,” said Chirico. “But the reality is cost of production is up on average 13 to 15 percent and it will require you to raise your average unit retails.”
PVH is aiming to do that through a combination of raising ticket prices, better management of inventory to reduce clearance rates and to sell clearance at higher prices. “In Tommy and Calvin we’ve been able to get higher retails through better execution rather than actually raising prices. But for the second half you’ll see the whole market raising prices,” said Chirico.
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