Tommy Hilfiger’s women’s wear business is on the move.
Tommy Hilfiger Licensing LLC, a wholly owned subsidiary of PVH Corp., has forged a multiyear licensing agreement with G-III Apparel Group to design, produce and distribute Tommy Hilfiger women’s wear collections in the U.S. and Canada. The deal encompasses Hilfiger’s women’s sportswear business, suit separates, performance and denim. This is in addition to dresses, women’s and men’s outerwear and luggage, which are already licensed to G-III by Hilfiger. The first offerings of the added categories under the new license are expected to be launched for the holiday season.
Hilfiger Collection, which is shown on the runway during New York Fashion Week, the global sportswear line (in its retail stores and on tommy.com) and Hilfiger Denim, the designer’s higher-end denim line, are not included in the licensing deal and will remain with PVH.
Macy’s will continue to be the principal retailer of Tommy Hilfiger women’s sportswear in the U.S., and men’s and women’s sportswear will continue to be a Macy’s exclusive offering. The other categories will be offered — and will continue to be offered — to other retailers, as well.
The deal with G-III, a $2.3 billion diversified apparel company, will support PVH’s strategy to drive the long-term potential of the Hilfiger women’s wear business, specifically through an increased focus on maximizing its North America opportunity by leveraging G-III’s expertise. The agreement is viewed as a $1 billion opportunity for G-III, similar to the scale the company is approaching with the Calvin Klein women’s business it runs under license from PVH. G-III is the licensee for Calvin Klein’s women’s sportswear, suits, dresses, performance wear, handbags, luggage and cold weather accessories. It has become the second largest licensee for the Calvin Klein brand. As with Hilfiger, the Calvin Klein Collection women’s and men’s businesses continue to be operated by PVH.
PVH bought the Hilfiger brand for $3 billion in 2009. Tommy Hilfiger has a multitude of products that are sold in the U.S. and Canada. Existing Tommy Hilfiger women’s categories include Collection; women’s sportswear; Hilfiger Denim, and handbags. Licensed categories include footwear, eyewear, watches and jewelry, fragrance, swimwear, intimate apparel, sleepwear, socks and belts, which will continue with their respective licensees.
The change in women’s wear will result in a reduction in staff at Hilfiger’s New York office, but the number of people hasn’t been confirmed yet. There will be no change in the management team at Hilfiger. G-III intends to speak to the Hilfiger team to develop the best personnel strategy for driving the business forward. In addition, Hilfiger and G-III are putting together a transition plan around inventory, to create a clean start for the launch of the new agreement.
Emanuel Chirico, chairman and chief executive officer of PVH Corp., said, “G-III is a long-term strategic partner for our Calvin Klein women’s wear collections and has done a tremendous job growing our overall Calvin Klein women’s business in North America. An expanded partnership with G-III represents a significant opportunity to leverage their market expertise to drive the continued expansion of the Tommy Hilfiger women’s apparel categories.”
Daniel Grieder, ceo of Tommy Hilfiger, noted that the company’s women’s collections are a key area of focus and a high-potential growth category for Hilfiger worldwide. “Over the past two decades, we have established a strong and elevated wholesale presence in Europe and Asia. We are confident that a partnership with G-III will unlock the great potential we see for our women’s collections in the U.S. and Canada and support our strategy of elevating our brand positioning,” said Grieder.
Morris Goldfarb, chairman, ceo and president of G-III, added, “We have already developed a strong working relationship with Tommy Hilfiger and our strategic partnership with PVH is even more powerful with the addition of this new business. We look forward to the opportunity to build a substantial profitable business for Tommy Hilfiger women’s wear in the U.S. and Canada.”
Further, he noted, “We’re great at classifications, and we’ve mastered the art of creating a collection. It took a while to turn the corner with the Calvin Klein Collection and we’ve done well with it. We’ve hired some incredible people to help build this business.”
He said Hilfiger himself will be involved in this. “It’s his brand and it’s his name and he cares very much how the brand is positioned,” said Goldfarb. The Hilfiger collections will be shown at 512 Seventh Avenue.
“Hilfiger has the potential to be a billion dollar business. We’re very close to that number at Calvin Klein. We see no reason we can’t get close to matching that,” said Goldfarb.
He said it took G-III eight or nine years with Calvin, which was a slow build because they added classifications over time. “With this one, we’re pretty much getting all the classifications at once. Within five years, we can get there,” he said. “It will be an incredibly important brand at retail. Basically we’ve stated we’re in the mode of acquiring brands. This had to be a great situation for us to accept this path,” said Goldfarb.
He said that PVH was in the process of renewing its agreement with Macy’s, and G-III will be renewing it. “Macy’s is a major customer of ours and we have a great relationship. We do well with Macy’s and Macy’s does well with us. We do have a comfort of working with the organization. The buyers, merchants and leadership is well familiar with G-III and the capabilities we have.”
In the last several years, G-III has successfully transformed itself into a broad-based apparel company, as it has pursued a diversification strategy. The company has shown itself to be one of the strongest companies in the apparel industry. For the three months ended Oct. 31, net income jumped 8.1 percent to $87.2 million from $80.6 million. Net sales rose 12 percent to $909.9 million from $812.3 million.
In December, Goldfarb said, “Our organic sales and profit increase clearly differentiate us as a leader in our industry. We achieved this performance in a challenging market environment.”
He told Wall Street analysts that while the mild winter weather was going to make for a tougher coat season this year, it was manageable. “We expect to end the season with clean inventories and acceptable margins, both for us and for our retail partners. Our expectation for full-year double-digit top-line growth with nearly twice that rate on the bottom line continues to show a very healthy company.”
As for other product categories, Goldfarb said, “Our dress, suits, sportswear and handbag businesses are performing really well. The dress business is strong for us. We’re gaining market share with our existing brands as well as from new power brands in our portfolio.” Goldfarb said he looked forward to another record year, and was positioned “with powerful growth initiatives as we move into fiscal 2017.”
G-III’s directly-owned companies include Vilebrequin, G.H. Bass, Andrew Marc, Marvin Richards and Winlit. Besides Hilfiger and Calvin Klein, G-III’s portfolio of more than 30 licensed and proprietary brands, including Kenneth Cole, Cole Haan, Guess, Levi’s, Dockers, Jessica Simpson, Vince Camuto, Ellen Tracy, Kensie, Mac & Jac, Jones New York, Ivanka Trump, Nine West and G.H. Bass, among others. It also has licenses with the four major professional sports leagues, as well as more than 100 U.S. colleges and universities.
Meantime, PVH Corp. stock climbed over 6 percent in after hours trading Monday to $78.08 after the company updated its earnings guidance. PVH is now forecasting earnings to be at or above $7 a share for the full year 2015. This is at the high end of the previously announced range of $6.90 to $7 a share. Chirico attributed the earnings to strength in Calvin Klein and Tommy Hilfiger International.
In a statement, Chirico said, “We were able to post stronger results despite a difficult U.S. retail environment, which was negatively impacted by unseasonably warm weather and decreased international tourist traffic and spending, particularly for our Tommy Hilfiger brand.”
G-III’s stock closed at $49.30, down 0.1 percent. PVH closed at $73.17, down 0.3 percent, at the close of the market.