PVH Furthers Expansion and Enhances Omnichannel Network - Analyst Blog

PVH Corp. (PVH), together with Gazal Corporation Limited, recently declared that they have penned a deal with their Australian joint venture (“JV”) to strengthen the latter's operations, via wholly owned subsidiaries.  

As part of the expansion of their 50/50 JV, which began operations in Feb 2014, PVH will introduce its Tommy Hilfiger, Van Heusen brands and Nancy Ganz in Australia and New Zealand. Also, this expansion will involve the addition of some of Gazal's other shirting, shapewear and tailored businesses.

The deal, which is anticipated to close in early Feb 2015, involves the following transactions. The JV will pen a 12-year long license and distribution agreement with PVH's wholly owned subsidiary, Tommy Hilfiger. It will further buy a few assets of the current retail Tommy Hilfiger operations in Australia and New Zealand, with the inclusion of 12 stand-alone retail stores of the brand.

Further, the JV will purchase Gazal's shirting, tailored and men's accessories business, which operates under PVH's Calvin Klein and Van Heusen brands. It will also acquire Gazal's Bracks, Pierre Cardin and Paramount brands. Though Gazal already distributes Van Heusen in Australia, under a license from PVH, the agreement will be transferred to the JV and will be valid up to 2033-end.

In spite of its shirting, tailored and men's accessories business being acquired, Gazal will be entitled to 50% interest in the expanded JV. Finally, the JV will acquire Gazal's shapewear operations, which will include Nancy Ganz, the Spanx brand and Gazal's own HoldmeTight brands.

We believe that this agreement is likely to solidify PVH's operations as the extension of its JV to Australia and New Zealand is most likely to be profitable for its Tommy Hilfiger, Van Heusen and Calvin Klein brands, given their popularity and market in those countries.

On the same day, PVH made another announcement pertaining to its strategy of achieving growth via expansion. The company's Calvin Klein btamd announced plans to expand its operations by introducing an international e-commerce strategy for the brand's website, calvinklein.com. The strategy aims to start direct e-commerce operations in over 20 countries by 2016-end.

The strategy involves individual websites, customized on the basis of market, despite having the same interface. The strategy, which was implemented with the re-launch of the company's digital flagship in the U.S. and extended across Europe, North America and South America, will also extend to Asia.

These sites feature a wide array of products including men and women's jeans and underwear, area-wise offerings of Calvin Klein's perfumes, apparel and accessories, home and children's products, depending on availability. The sites will launch on web, mobile and also foray into the world of social media.

PVH has been focusing on expansion and its higher-margin businesses for a long time now. We believe that this Zacks Rank #3 (Hold) company is likely to boost results by undertaking these growth measures.

Better ranked stocks in the same industry include Columbia Sportswear Company (COLM), G-III Apparel Group, Ltd. (GIII), with a Zacks Rank #1 (Strong Buy) each and Michael Kors Holdings Limited (KORS), with a Zacks Rank #2 (Buy).

 

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