PVH Corp. could add nearly $2 billion to its annual revenues over the next five years without making a major acquisition.
Emanuel Chirico, chairman and chief executive officer, told the annual meeting of shareholders in New York Thursday that, by taking advantage of opportunities to buy out joint venture partners and acquire licenses or allow them to expire, the company stands to “unlock” revenue pools for the Calvin Klein and Tommy Hilfiger brands, particularly in faster-growing markets such as Asia and Latin America.
Specifically on Tommy Hilfiger, Chirico said the brand enjoys strong penetration in North America and Europe and is expected to grow at a high-single-digit pace in those markets.
“Where we see really outsized growth — double-digit growth — is in Latin America and Asia,” he told shareholders. “For us, the vast majority of these businesses are licensed businesses with strong strategic partners in each of those areas.”
PVH, which generated revenues of $8.2 billion in 2013, owns 45 percent of a joint venture for Tommy Hilfiger in China and has the opportunity in the next three years to buy the balance of the business and bring it in-house. Retail sales for the brand in China last year rose about 20 percent, to about $135 million, with “very healthy profitability,” Chirico said.
Perhaps counterintuitively, PVH’s February 2013 acquisition of The Warnaco Group, which put Calvin Klein jeans and underwear under the PVH umbrella, has helped strengthen the case for bringing inside the Tommy Hilfiger businesses in China and other markets.
“The Warnaco acquisition has given us the opportunity to really look at that in a meaningful way,” Chirico said. “We have a much larger Calvin Klein business in China today with a strong regional Asian platform, systems, logistics and sourcing components there that allow us to have greater confidence that we could bring that business in-house, maximize its growth and bring that profitability to our shareholders as we go forward.”
PVH has other businesses in Asia, including one in Korea, built on licenses that have between four and six years remaining. “As the integration of Calvin Klein comes online fully, it’ll give us the ability to bring those businesses in-house and do it in a very financially accretive way,” Chirico said.
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