PVH Sees $2B Opportunity in In-house Add-Ons

Licenses and joint ventures stand to boost profitability and expand revenues, ceo tells annual meeting.

PVH Corp. could add nearly $2 billion to its annual revenues over the next five years without making a major acquisition.

This story first appeared in the June 20, 2014 issue of WWD.  Subscribe Today.

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.


PVH directly operates a Calvin Klein business in Brazil that accounts for the vast majority of the more than $300 million in retail sales recorded by the brand in Latin America and is highly profitable. It also operates a smaller Tommy Hilfiger business in Brazil through a joint venture with InBrands that has grown rapidly but accounts for less than 10 percent of the brand’s Latin American business that, at retail, is over $360 million a year. Chirico described Brazil as the largest underpenetrated opportunity for the Tommy brand in Latin America.


In Mexico, most Calvin Klein business already is done on an in-house basis while the Tommy Hilfiger business is licensed and among those that could be moved to within the PVH structure in the years ahead.

The acquisition of Warnaco has posed a number of integration problems that Chirico believes will be fully resolved by the middle of next year, consistent with previous projections, paving the way for more intense scrutiny of possible conversion to in-house management of businesses that are currently licensed or partially owned by third parties. He told WWD that PVH was aware that the acquired Warnaco businesses would require work.

“We knew there was a lack of investment,” he said. “We didn’t know the extent of it.”

Chirico noted that the company has earmarked $60 million to upgrade products, marketing, systems, personnel and other elements of the former Warnaco business. PVH expects Calvin Klein global sales worldwide to reach $10 billion in 2017, up from about $2.5 billion in 2003, when PVH bought the designer’s business, and $7.8 billion last year.

He noted that Tommy Hilfiger has a profitable $100 million e-commerce business. Limited by the previous control of jeans and underwear by Warnaco prior to the acquisition, he described Calvin Klein’s e-commerce business as being in its “infancy” but said he expected it to “quickly ramp up” now that the major product categories are being managed together.