In the year’s biggest apparel industry acquisition, Phillips-Van Heusen Corp. purchased Tommy Hilfiger for $3.1 billion in May. The deal doubled the size of PVH, a 130-year-old company with roots in men’s dress shirts, and catapulted it into the ranks of the world’s largest fashion players — ahead of The Jones Group, Liz Claiborne Inc. and Hanesbrands Inc., although still smaller than Polo Ralph Lauren Corp. and VF Corp.
Amsterdam-based Tommy Hilfiger joined PVH’s other megabrand, Calvin Klein, which it acquired in 2003, and heritage labels Izod, Arrow and Van Heusen, as well as an extensive portfolio of licensed dress shirt and neckwear brands. PVH’s 2010 total revenue is forecast at $4.61 billion.
The architect of this acquisition was PVH chief executive Emanuel Chirico, a 17-year veteran of the company who worked his way up from the controller position. So far, the deal has lifted PVH’s financial performance and the integration of Tommy Hilfiger is on plan.
In the most recent third quarter ended Oct. 31, the Tommy Hilfiger business posted $708.4 million in revenue, or $48.4 million higher than the top end of PVH’s guidance, because of stronger-than-anticipated sales in Europe and North America, earning kudos from analysts. Total PVH revenue more than doubled to $1.52 billion from $697.4 million a year ago.
Bronx-born Chirico joined PVH in 1993 as an accountant from Ernst & Young and worked closely with mentor Bruce Klatsky — including on the Calvin Klein deal. Klatsky retired as PVH chief in 2005. Over the years, Chirico held the president and chief financial and chief operating officer posts, assuming the top job in 2006 — along the way overcoming a life-threatening bout with lymphoma.
“The North American integration is on plan and on target to deliver the core savings that we’ve talked about. It’s moving very smoothly for us, and we’re very happy how that’s going,” Chirico told analysts of the Hilfiger acquisition on Dec. 3. “At U.S. wholesale, we are seeing good performance at Macy’s [where the Tommy Hilfiger brand is sold exclusively]. Sales are running ahead of last year and our sell-throughs at retail are running ahead of plan.”
PVH’s Calvin Klein business continues to propel profits, with total revenues up 16 percent and operating earnings up more than 33 percent in the third quarter, on the strength of strong sellers like the Euphoria fragrance and the Calvin Klein X line of underwear.
“I’ve always been interested in the fashion industry because it’s fast and exciting, and I love the dynamic of the business,” said Chirico, a former basketball player and boxer. “You can make changes relatively quickly. If you can get the right product and design into the marketplace, you can effect change within months. In something like the auto industry, it would take years.”