Arvind Brands forms joint venture with Calvin Klein
The company bought out the stake in the Calvin Kelin JV from the Murjani group and private equity firm Matrix Partners
Bangalore: Arvind Brands and Retail Ltd, a unit of textile maker Arvind Ltd, has entered into a joint venture (JV) with Calvin Klein Inc. and expects to triple sales of the jeans and innerwear brand in India in three years.
Arvind bought out the stake in the Calvin Klein JV from the Murjani Group and private equity firm Matrix Partners, adding another higher-priced, popular label to its fast expanding portfolio. Terms of the deal weren’t disclosed.
J. Suresh, chief executive of Arvind’s brands business, said the addition of Calvin Klein will help raise Arvind’s share of the Rs.800 crore “bridge-to-luxury” apparel market to 90%.
Bridge-to-luxury is retail jargon for products craved by the upper middle class that are less pricey than luxury brands such as Gucci and Louis Vuitton, but more expensive than other labels. Arvind already sells Tommy Hilfiger and Nautica in this segment.
“As income levels go up, the market for bridge-to-luxury is increasing. With Calvin Klein, we’ll own 90% of this segment. We also have big ambitions on innerwear and Calvin Klein helps us with this,” Suresh said. “As a brand, Calvin Klein’s imagery is not restricted to a particular category and it has a wide appeal. So in future, we will introduce formals, suits and blazers, etc.”
Arvind, which operates the Megamart retail chain, sells a mix of its own brands such as Flying Machine and Newport as well as licensed international brands including Arrow, Cherokee and Tommy Hilfiger. Over the past two years, the firm has signed deals to sell several international brands such as Hanes and Ed Hardy.
US clothing maker PVH Corp. inherited the entire Calvin Klein business when it bought Warnaco Group Inc. for $2.9 billion in February 2013. Until then, PVH owned the right to sell formal wear and sportswear under the Calvin Klein label.
Arvind expects to raise annual sales of Calvin Klein to Rs.500 crore and add about 50 stores in three years, from annual sales of Rs.150 crore and 41 stores now, Suresh said. Rishi Vasudev, who used to head the Arrow, Gant and Izod brands at Arvind, will head the Calvin Klein JV.
Suresh said the JV’s board will have two directors each from Arvind and PVH, and Arvind will run the operations of the firm.
This year, Arvind’s brands and retail business has grown faster than many other retailers. It reported a 36% jump in revenue to Rs.1,413.9 crore for the nine months ended 31 December partly as the firm expanded distribution of brands such as US Polo and Nautica.
“Bridge-to-luxury is an attractive and a high-growth segment. Consumers who buy these products are usually people who have travelled abroad and are aware of most of these brands so you don’t need to aggressively advertise as well. The key thing is pricing: the prices need to be reasonable, relative to the segment,” said Abhishek Ranganathan, analyst, PhillipCapital.