Textile and Apparel Weekly
November 23, 2012
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Social networking sends a message to business
No such thing as affordable luxury
Clouds of doubt darken trade outlook
Fashioning a future in a fierce market
Online shopping for mother & infants grows rapidly
Diplomatic fashion strikes a pose
More Chinese retailers 'eyeing London'
Designers awarded at Fashion Week
A merger consolidates Calvin Klein
Social networking sends a message to business
DATE: 2012-11-26
Applying social technology into the daily operations of businesses is increasingly popular because it
is seen as a great way to improve communications and collaboration between enterprises and
customers at a reasonably low cost.More than 1.5 billion shoppers around the world have an
account with a social networking site and almost one in five online hours is spent on social networks,
increasingly via mobile devices.
Whether discussing consumer products or organizing political movements, people around the world
are constantly using social media platforms to browse and share information.
"The HR department started posting recruitment notices on social forums including Weibo, a
Chinese Twitter-like micro-blogging service, and Weixin, a social mobile application, to attract more
applications from the public without spending any money," said Zhang Guanjin, the manager of
Shaoxing Jinyong Textile Co.
Zhang added that social applications have been widely used by his company for such tasks as
organizing events among employees, communicating with foreign clients and receiving feedback
from domestic customers.
The majority of well-known brands and large enterprises have registered micro-blogging accounts to
release updated information about themselves and their products to attract the attention of Internet
users.
Consumer-facing companies quickly recognized that social technology provides entirely new ways
of connecting to customers and can be highly effective in gathering rich, unfiltered insights to guide
product development and create precisely targeted messages and offers.
"With the Internet being recognized as the most convenient communication tool, it is time for
enterprises to make use of social technology to develop higher profits and lower costs," said Zhang.
Source: China Textile Network Company
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The impact of social technology on the economy and its potential to create value across industries is
just beginning to be understood, according to a new report by the McKinsey Global Institute,
McKinsey's business and economics research arm.
The report showed that while 70 percent of companies are using social technology in some way,
very few are anywhere near achieving the full potential benefit.
By fully implementing social technology, companies can raise the productivity of "interaction
workers" (high-skill knowledge workers including managers and other professionals) by 20 to 25
percent, MGI estimated.
"There's rightly a lot of focus on the big opportunities for companies to use social media to connect
with customers. But we find the opportunities for companies that apply social technology across the
organization are twice the size," said Chen Yougang, a McKinsey partner and head of McKinsey
Global Institute in China.
Chen added when it comes to organizational knowledge, there is a huge amount of "dark matter"
trapped in e-mail inboxes that can be made visible to the rest of the organization by using social
technology.
Individual firms can gain even more.
MGI suggested that consumer packaged goods companies that embrace social technology across
all value chain steps can increase margins by as much as 60 percent by using it to connect with
customers and to generate sharper customer insights, as well as by using it to improve the
productivity of knowledge workers.
"Capturing the full value available from the use of social technology will be a challenge for
enterprises primarily because they will have to transform their organizational structures, processes
and culture to become extended networked enterprises," said Elsie Chang, McKinsey partner and a
researcher for McKinsey Global Institute in China.
Chang added that applying social technology is also a good way for small and medium-sized
enterprises to minimize the expense of expanding communications with customers directly.
As a user of social technology, Huang Xiangxun believes it helped his company Shanghai Haobo
Chair Co to continue to profit over the past two years despite the gloomy economy.
"Making use of social forums for building up the reputation of our brands was the first step we took
to introduce our products. Receiving advice from the public by having an online survey with prizes
was also quite popular," said Huang, who encourages his employees to adopt all kinds of social
applications for work if they want to.
Huang added applying social technology is definitely a profitable method of helping enterprises to
promote their products, extend the business networks and get closer to customers.
Source: Chinadaily.com.cn via CNTEX
Source: China Textile Network Company
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No such thing as affordable luxury
DATE: 2012-11-26
Cashmere designer Brunello Cucinelli tells Gan Tian that China's luxury market is growing because
its people want exclusive items and service.
Cashmere designer Brunello Cucinelli believes he is reversing the tide of history and introducing
Italian lifestyles to the East. The Italian was attending the opening of his label's flagship store in
Shanghai, where he recounted the stories of Marco Polo and Giovanni da Pian del Carpine, who he
says long ago introduced Asian lifestyles to Italy.
The 58-year-old created a series of brightly colored cashmere sweaters for women in the 1970s,
which created a scene at the time. Now his collection includes cardigans, V-neck sweaters and
pants - all made from the wool of goats.
He describes his creations as "sporty chic" and they are popular among celebrities such as the
United Kingdom's Prince William and singer/songwriter Craig David.
"Chinese people like cashmere. I've never met anyone who doesn't like cashmere here. The
question is, sometimes it can be very expensive," Cucinelli says.
"That is what I want to introduce to Chinese consumers: high-quality and high-craftsmanship
products."
When he started his label in 1985, Cucinelli bought an old castle in his wife's hometown, Solomeo.
He restored the 600-year-old property, converting it into the headquarters of his cashmere company.
Cucinelli believes the world's best cashmere comes from Inner Mongolia autonomous region. But as
a ready-to-wear designer, Cucinelli does not deal directly with Chinese raw material producers.
"There are fabric companies in Italy buying raw materials from China. We buy fabrics directly from
them, but we also apply our techniques, such as dyeing, knitting and weaving."
He first visited Beijing in 1989, when the country was in the middle of huge changes due to reform
and opening-up. However, it was two decades later, in 2009, when he opened his first boutique
store in China. The designer says, "It was a new country that I could not even recognize".
When Cucinelli was young, he had a fashionable neighbor who would often fly to Paris to shop and
this sort of person became a template for his ideal client.
He believes such people enjoy flying to fashionable places, like Paris, Milan or Miami, because of
the lively atmosphere there.
"Large numbers of Russians jet in to buy products in Milan. This is going to happen to China,"
Cucinelli says.
Currently, 4 percent of Brunello Cucinelli's sales are made in China, but the company estimates
about 1.5 percent of the company's products are bought by Chinese tourists in shopping centers like
Milan and Paris.
Cucinelli says this number is "quite interesting", because it indicates a dynamic market. He adds that
he hopes Chinese tourists will comprise 4 to 6 percent of sales within three to four years.
"We will take really good care of tourists because it is a key business of ours, especially those from
China, who are becoming more sophisticated."
Source: China Textile Network Company
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His company currently has nine boutiques in China. He has also expanded to second-tier cities like
Chengdu and Dalian, but the next store opening will be another outlet in Beijing.
"We want to deal with the Chinese market very carefully, very exclusively, in terms of products,"
Gucinelli says.
"Luxury is very exclusive. I don't think that you can say accessible or affordable luxury. Otherwise, it
is not luxury at all," he adds.
Source: Chinadaily.com.cn via CNTEX
Clouds of doubt darken trade outlook
DATE: 2012-11-23
As the European Union has lowered expectations for its economy, China's trade relationship with its
largest trading partner looks gloomy for the rest of this year, and all of next, analysts say.
Although China's overall export performance in October turned out to be better than expected, the
figures related to the EU were disappointing.
China's total exports last month were $175.57 billion (138 billion euros), 11.6 percent higher yearon-year compared with September's 9.9 percent year-on-year growth.
However, bilateral trade between China and the EU continued to drop by 5.5 percent from a year
earlier to $41.99 billion in October. The decrease was 3 percent year-on-year for bilateral trade in
the first 10 months of this year.
In October, exports to the EU fell 8 percent year-on-year to $26.43 billion, while imports fell 0.8
percent to $15.57 billion.
The European Commission issued its autumn economic outlook on Nov 7, describing the region's
economy as "sailing through rough waters". The report forecasts that the EU will have an annual
GDP growth of 0.5 percent in 2013. In the May report, it had predicted growth of 1.3 percent next
year.
Worse, the German economy, which was relatively robust during the EU debt crisis, is expected to
have slowed further in the second half of 2012.
The European Commission report estimates that Germany will have annual GDP growth of 0.8
percent in 2012 and 2013. It had previously predicted 1 percent for this year and 1.4 percent for
2013.
In the first 10 months of this year, China's exports to Germany fell 9.1 percent year-on-year to
$57.77 billion, and imports fell by 0.3 percent to $76.43 billion.
Feng Zhongping, an expert in European studies at the China Institutes of Contemporary
International Relations, says this suggests that a long period of recovery from the financial crisis.
"The performance of Germany, the largest economy in Europe, reflects that uncertainty still weighs
on the economy of the EU as a whole," he says.
"The EU's expectation of its economy will largely affect the business confidence of Chinese
exporters, which may lead them to turn to other markets."
Source: China Textile Network Company
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Shou Lumin, deputy director of the construction and management committee of China Textile City in
Shaoxing, East China's Zhejiang province, the country's largest textile industry cluster, says its
member companies are making more efforts to expand in markets such as Russia, Southeast Asia
and the Middle East.
"The European economy is not good, and demand from European markets is falling, so why should
we stick to that?" she asks. "There are larger business opportunities in the emerging markets." Shou
says many textile companies in Shaoxing are retreating from European markets.
"It is not that they don't want to do business in European markets," she says. "The uncertainty with
the European economy and shrinking demand scares them."
Yu Qi, sales manager at Shaoxing Qingwu Textile, says the company is looking to markets other
than Europe.
"We used to focus on the Italian market, and everybody can see what the Italian economy is like
now. The risks are too high for us to remain in that market," Yu says.
Li Jian, a researcher with the Chinese Academy of International Trade and Economic Cooperation, a
think tank under the Ministry of Commerce, says this attitude is likely to persist.
"Chinese exporters have no time to wait for the slow recovery of the European economy. Also, the
rising trade frictions between the two regions are driving them away," he says.
Li says European countries will take steps to revitalize their manufacturing industries and increase
job opportunities as they struggle to repair their economies.
"It will have a strong impact on Chinese companies there, who may be treated unfairly," he says.
In the past several months, trade friction between China and the EU has grown. As well as
announcing an investigation into alleged solar panel dumping, the EU is collecting evidence relating
to China's telecom equipment companies Huawei and ZTE and anti-dumping and subsidy rules.
"It seems that the European countries are making efforts to protect their own companies in
industries where China is doing well in the European market, or by raising the standards of
traditional industries like textiles," Li says.
"It is understandable, but harmful to the business of Chinese companies. It is smart for the
companies to move their eggs to other baskets, such as the emerging markets."
According to the Ministry of Commerce, China's big traditional trade partners, the EU, the United
States and Japan, now account for 56 percent of China's total trade volume. At its peak, it was about
70 percent.
In the first 10 months of this year, China's trade with Russia grew 13.4 percent year-on-year, and by
34.9 percent for South Africa and 9.4 percent for the ASEAN region.
Although China's total trade performance was better than expected, it is still a tough ask for the
country to reach its 10 percent annual growth target.
"October's stronger-than-expected exports growth was probably because of the seasonal pick-up of
Christmas orders and better-than-expected US demand," says Sun Junwei, an economist at HSBC.
Source: China Textile Network Company
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"In fact, this trend in upside surprises is unlikely to be sustained over the coming months,
considering the risks of the fiscal cliff in the US, the European crisis and still weak growth in other
major economies."
Chen Demin, China's minister of commerce, also admits 10 percent growth is difficult to attain and
the country is now trying to maintain its share in the global market.
Source: Chinadaily.com.cn via CNTEX
Fashioning a future in a fierce market
DATE: 2012-11-23
Walk through many malls in Shanghai and you will find, for example, a North Face store next to
Columbia and Jack Wolfskin. Perhaps there will also be a Lee store and Gap, along with many local
names nearby. For VF Corp, one of the largest US apparel manufacturers by sales revenue,
competition in China is becoming fierce across its entire business spectrum.
So, as a profit-driven, shareholder-answering concern, the country may be a land of opportunity but
it has to fight for its bit of what's available.
"Competition is increasing and we expect that will continue as others are looking for sources of
growth, particularly international brands," said Aidan J. O'Meara, president of VF Asia-Pacific, who
has been overseeing the Chinese market for more than five years.
As the owner of dozens of brands, including North Face, Lee, Wrangler and Timberland, VF sells a
variety of clothes from jeans and outerwear to suits.
Taking just the outdoor category as an example, in which VF has strong brand awareness, there are
325 international outdoor labels and 229 domestic ones in China in 2010, according to China
Outdoor Commerce Alliance. To make things more challenging, local manufacturers have become
more and more competitive in recent years.
The Beijing-based outdoor brand Toread, with its more than 13-year history in China, has opened
more than 1,000 stores around the nation. Its turnover reached 434 million yuan ($69.49 million) in
2010.
In the jeans sector, VF's Lee brand topped the ranks in terms of market share in China in 2012,
according to China National Commercial Information Center. However, the local brand
Meters/bonwe and Kipone also have broad market recognition among local customers. Fujian-based
Kipone was one of the top 10 jeans brands measured by market share in 2012.
However, VF remains positive about the market and has introduced a rapid expansion plan to a
broad customer base and increased market penetration around the nation. In the next five years, the
company plans to add the number of stores and shops-in-shops to 6,000 from the current figure of
about 2,300 and will have its brand introduced to smaller cities.
As part of the plan, VF will launch its largest distribution center in Kunshan, Suzhou city, in Jiangsu
province, in 2013.
Looking forward, China is expected to contribute 60 percent of sales revenue to the company's AsiaPacific region by 2017 compared with 50 percent to date.
Source: China Textile Network Company
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O'Meara, 49, seems quite confident about achieving that goal, despite many experts warning there
are too many apparel brands in the Chinese market and pointing to the fact that the nation's
economic growth is cooling.
"We believe that China will remain a fast-growing economy which will become more consumptiondriven in the future. We also believe in the strength and diversity of our brand portfolio with its
proven relevance to Chinese customers," he said.
Under O'Meara's management, VF's China business reported more than 50 percent sales growth
annually over the past five years. The number is projected to be 20 percent this year amid cooling
economic growth and increasing competition.
O'Meara said the company plans to pay more attention to differentiating itself from others.
"When we say differentiate, we mean a high level of brand awareness compared with other brands
and a functional differentiation," said O'Meara. "Differentiation means creating a distinctive
personality."
As head of a US company wanting to expand in China, O'Meara recognizes how important it is to
make the brand relevant to local people to expand the customer base.
"We spend a lot of time understanding the market and trying to connect our brands to the emotional
and physical needs of customers," he said.
He took the skateboarding brand Vans as an example. The sport, which is popular in Western
countries, came to China in the 1990s. Even now, few use a skateboard in China and those that do
are mainly foreigners and overseas returnees.
The company has recognized the young generation's interest in new fashion and self-expression
and tries to tell its brand story from a new angle to the Chinese.
"We talk about history, heritage and the personality of Vans. And we talk more about other aspects
of Vans. We say the Vans' brand is very involved in the music industry, the youth music industry in
North America," said O'Meara. "We are not saying 'Here we are. We are an American brand'. We
want to make the global brands respected and to connect with the Chinese."
Having overseen the Chinese market for more than five years, O'Meara has his own way to connect
with local consumers and obtain first-hand information about market trends.
Appointed as the president of VF Asia-Pacific region in 2007, O'Meara visits Shanghai at least once
a month. He visits customers' homes and looks into people's wardrobes to see what they have. He
has made such visits 12 to 15 times for VF's different brands in the past few years.
"It is important that I understand how our brands can connect with people and it is important to
understand how people live. You cannot understand the role your brands play in their lives without
understanding life," said O'Meara.
He also visits universities to see how the younger generation lives. He travels around Shanghai with
them to understand their hobbies and interests. He would watch people doing tai chi in the city's
parks in the morning to get a sense of how local people live and what is important to them.
Unlike VF, many companies prefer to invite certain focus groups to the office and discuss their
preferences formally.
Source: China Textile Network Company
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"Some companies do focus on groups and bring people into the office, but it is artificial and people
are not comfortable. Sometimes they do not tell you the truth because they do not want to reveal it,"
said O'Meara. "You should see what people actually do, not just what they say they do."
To support growth in the Chinese market, the company plans to pay more attention to certain
growing business sectors, such as the outdoor industry, a sector that "will be the most promising
business in terms of growth potential", said O'Meara.
People's desire for a better life and willingness to participate in outdoor activities are the main
reasons for the growth of the industry. Booming outdoor activities in China encourage businesses to
leave no stone unturned to cash in on the opportunities.
According to the China Textile Commerce Association, China's outdoor apparel market has grown at
an average annual rate of 47.33 percent from 2000 to 2010.
In 2011, total revenue in the sector reached 10.76 billion yuan, and the number of outdoor brands
available in the country surged year-on-year by 29 percent to 717.
Columbia Sportswear, the US brand launched in the Chinese mainland market in 2004, has 530
stores in 135 cities. Its sales amounted to $123 million last year.
To cultivate the outdoor culture in China, VF launched its online platform to provide potential buyers
with more information about outdoor activities.
"Chinese consumers are prosperous. More have leisure time and more have interests in traveling in
and outside China. We think those trends will continue and are favorable," said O'Meara.
Currently, VF has more than 10 brands in the Chinese market and six are directly managed. Its
jeans brand Lee and outdoor apparel brand The North Face are the best known among Chinese
shoppers. China has become the second-largest market for the two brands globally.
Some premium brands such as Jeans Sports are run by local distributors.
"They are relatively small. We do not have enough specialist knowledge in China to be able to
manage them," said O'Meara. "We are better off working with partners in the luxury goods area
because they have good connections with landlords and a good customer base and they can use
loyalty programs to encourage customers."
When he started work in China, O'Meara admitted he worried about fake products that might have
negative impact on VF's image. Now he says he is not so worried.
"Chinese shoppers know where to buy real products. Customers do not want friends to know they
buy counterfeit products. So there is less of a problem than I thought when I started here," said
O'Meara.
VF, based in Greensboro, North Carolina, confirmed its previous 2012 outlook provided in late July
for revenues in Asia to increase about 20 percent and for revenues in Europe to grow at a low
double-digit rate.
O'Meara said: "Our strategies for growth in Asia-Pacific - winning big in China, expanding our
footprint within other countries in the region, leveraging our scale and focusing on our largest brands
- give us confidence in our ability to reach $2 billion in revenues by 2017 in this growing and
dynamic market."
Source: China Textile Network Company
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VF expects substantial growth in each major Asia-Pacific country during the next five years. China,
currently comprising about half of the region's total revenues, is expected to account for 60 percent
of total revenues by 2017, growing at an annual rate of about 21 percent over the next five years.
Source: Chinadaily.com.cn via CNTEX
Online shopping for mother & infants grows rapidly
DATE: 2012-11-23
According to iResearch, in the first half of 2012, mother & infants online shopping valued more than
RMB 20 billion in China, two-thirds online deals of the full year in 2011. The market in the second
half is expected to maintain its high growth, increase by 86% in the whole year and reach RMB 61
billion. It will take about 4.3% of the whole online shopping market.
Look into the mother & infants online market structure, B2C accounted for 24.4% in 2011, this data
up to 36% in the first half of 2012. Look into the mother & infants online market share, in the first half
of 2012, Tmall B2C accounted for 47% market share. 360Buy B2C accounted for 11.4%, claimed
the 2nd. Redbaby accounted for 6%, claimed the 3rd.
According to public information, in March 2012, 360Buy sales valued at RMB 0.1billion in mother &
infants. In June 2012,the data over RMB 0.2billion.It maintains a growth of 30% m/m. In April 2012,
DangDang announced its own brand “ DangDangBaby” officially launched. In May 2012, Suning’s
mother & infants sales platform officially launched. All indications that the core enterprise will
continue to expand mother & infants online market.
Domestic mother & infants online shopping will reach an new climax in the second half. On one
hand, international major online merchants will pay more attention to the growing demand in China
and foreign brands will continue to enter.On the other hand, more mother & infants online platform
will be set and the promotions will boost marketing.
Source: CNTEX
Diplomatic fashion strikes a pose
DATE: 2012-11-23
The Diplomats' National Costume and Oriental Fashion Show was held at T-Space in Beijing on
Wednesday.
Diplomats from 91 countries, including the United States, Spain and Brazil, participated in the event,
showcasing beautiful garments from their countries.
Diplomats from Belarus display a talent for graceful maneuverability at a fashion show in Beijing on
Thursday. Diplomats from 91 countries, including the United States, Spain and Brazil, took part in
the event.
The highlight of the event was the traditional Chinese costume show, during which diplomats were
invited to present qipao-like evening dresses and formal suits featuring red patterns of peony flowers
and phoenixes. The garments were designed by the celebrated Chinese fashion designers Zeng
Source: China Textile Network Company
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Dan, Liang Zi and Zhang Wei. The designers use seamless weaving techniques to present different
ways of silk crafting.
The one-hour show, co-organized by the Beijing Chaoyang Commission of Commerce and the
China International Friendship and Culture Festival Committee, aims to present well-made garments
from different cultures, which helps improve friendships and promotes communication among
different cultures.
The event is a major part of the 15th China International Friendship and Culture Festival and
promotes cultural exchanges among diplomats from different countries.
Hong Guangxin, vice-director of the Beijing Chaoyang Commission of Commerce, also sees
business opportunities in the event. "By attending cultural events and building up a cultural platform
like this, we are trying to deliver a healthy image of China's enterprises and products to the rest of
the world. It will benefit communication between the two," Hong says.
This is the fourth time that the fashion show has been held in Beijing. The show created a buzz
when it was held for the first time in 2009 at the Mei Lanfang Theater, with more than 80 diplomats
modeling their countries' costumes.
Source: Chinadaily.com.cn via CNTEX
More Chinese retailers 'eyeing London'
DATE: 2012-11-23
London will see an influx of Chinese retailers over the next few years, with as many as five looking
for stores, including fashion retailers JNBY, Li-Ning and luxury menswear brand Eve Enterprise
Group, research from international real estate agent Savills showed on Thursday. According to
Peter Thomas, director of central London retail at Savills, the potential for Chinese retail expansion
in the UK came to the attention of London agents with the first entrant, Bosideng, in July 2011.
"While its one of China's largest clothing companies, our research has shown that it only ranked
sixth domestically in terms of annual retail sales, meaning that while it was one of the first to land in
London, it certainly won't be one of the last to take a store here," said Thomas.
Savills reports that of the retailers with the highest annual turnover, several, including JNBY and LiNing, have already begun expansion into Europe and the US.To put the strength of the top Chinese
retailers into context, the firm has compared their annual turnover with that of recently expanding
American retailers, J Crew, which has just announced its first UK store will be on Regent Street, a
prime shopping location, and Forever 21. The two companies have annual global turnovers of
approximately £ 990 million (about $1580 million) and £ 800 million respectively. In comparison,
China's top seven retailers have annual turnovers of more than £ 850 million. For five of these
brands that only takes into account their turnover in China.
"There is a long list of strong Chinese brands that have begun to look into global expansion and
London has a strong appeal due to its reputation as an international shopping destination," said Nick
Bradstreet, deputy managing director of Savills in Hong Kong.
Source: Chinadaily.com.cn via CNTEX
Source: China Textile Network Company
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Designers awarded at Fashion Week
DATE: 2012-11-21
Talented designers in the Chinese fashion industry received the country's top honors at the China
Fashion Week annual award ceremony in Beijing on Friday evening.
Zeng Fengfei won the top honor, the Jinding Award.
Liu Tongtong and Fu Zhenggang were named best models at the award ceremony of China Fashion
Week in Beijing on Friday.
The 48-year-old designer said the award carries weight in China's fashion circles, and receiving it
came as a surprise to him.
"I am very pleased that my 10-year efforts led me this far. Over the next decade, I will continue to
work for greater global recognition of Chinese fashion labels," Zeng said.
Wang Yutao was awarded best designer for men'swear, and Liu Wei was named the best designer
for women's clothing.
Wang, 38, established his label, Beautyberry, in 2005, claimed the Jinding Award last year.
His designs this year featured diamond patterns ma,de up of matches, embodying nostalgia over
childhood memories. His excellent choices of fabric and color fit well with overall elegant and
reserved style, said Yang Qian, one of the judges.
In an interview with China Daily last week, Wang said he is the first local menswear designer who
has made his name on the world's runway.
And he is not bragging. In April, he brought his show to Berlin Fashion Week, earning a good
reputation.
He said he started locally, which was not a bad thing. It gave him space to practise in each process
of the fashion business, not only in design, but also marketing, running shows, hiring models and
shooting advertising campaigns.
He encouraged young designers to use the exposure from China Fashion Week.
"The China Fashion Week is a good platform for many young designers to start their dreams. It is
very professional, and it shows designers' personalities and characteristics," he said.
While blending the East and West has become increasingly popular among designers, Liu stood out
using Chinese paper-cutting, bright colors and high-tech fabrics, said Pan Yong, another judge for
the competition. Established in 1997, China Fashion Week is held twice a year in Beijing and is a
major platform for fashion design and trend shows in China.
Source: Chinadaily.com.cn via CNTEX
A merger consolidates Calvin Klein
DATE: 2012-11-21
FEW of Calvin Klein’s customers know, and probably fewer would care, that the fashion label is
controlled by two separate companies. PVH (once Phillips-Van Heusen, a shirt maker) owns the
Source: China Textile Network Company
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brand. Warnaco, which dates its history back to 1874, manufactures and distributes the jeans (and
owns the underwear). On October 31st the two companies announced that they would merge. The
idea is to reunite the “House of Calvin Klein” and form one of the biggest “global branded lifestyle
apparel companies in the world”, with sales of more than $8 billion.
The stockmarkets, just back from their hurricane-induced holiday, were pleased. Warnaco’s shares
jumped nearly 40%, which isn’t surprising, since the $2.9 billion PVH is dishing out to acquire it is a
third more than the company’s value before the announcement. PVH’s shares also jumped.
Such mergers can be fraught affairs but the PVH-Warnaco fit probably has better prospects than
most. PVH, which patented the “soft-folding” collar in 1919, has been snapping up brands since the
mid-1980s, including Izod in 1995 and Tommy Hilfiger in 2010. Warnaco brings a wardrobe full of
new ones, such as Olga (underwear), alongside Calvin Klein. These will “slide nicely into PVH’s own
range,” says Peter Wahlstrom, an analyst at Morningstar. Warnaco’s chief executive, Helen
McCluskey, will join PVH’s board, which suggests relations will be friendly. But control seems to be
pretty firmly in the hands of PVH, which has higher margins and a more-buoyant share price than its
new mate. Mr Wahlstrom thinks the promise to save $100m a year on combined costs, mainly by
spending less on corporate overheads and back offices, will be easily met.
The biggest gains will come from expanding PVH’s geographical reach and from meshing the
design and marketing of Calvin Klein better with its manufacturing and distribution. The Tommy
Hilfiger acquisition brought PVH a big European operation. Warnaco gives it a larger presence in
Asia and Latin America. PVH’s revenue in those fast-growing, brand-hungry regions will double.
Calvin Klein’s sales of jeans and underwear in America and Europe have been less snappy than
they could be. PVH thinks it can bring back the zing. But the fragrance licences will continue to
belong to a cosmetics company, Coty. Even after the merger the house of Calvin will be missing a
wing.
Source: The Economist via CNTEX
Source: China Textile Network Company
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