Going ahead with its strategy of expanding higher-margin businesses, PVH Corp. (PVH) entered into a license agreement with Axis Golf Pty. Ltd. to market and distribute IZOD brand products across Australia, New Zealand, Fiji and other South Pacific islands. The agreement will be valid through 2018.
As per the agreement, Axis Golf will manufacture, market, and distribute IZOD-branded dress shirts, neckwear and underwear. Axis Golf will also be responsible for distributing accessories purchased from other licensees of IZOD.
Apart from retailing IZOD products through department stores as well as golf and sports retail outlets, Axis Golf will make the products available at Golf World and Golf Mart, the retail store chains owned by one of its affiliates. Further, the licensee will be responsible for operating IZOD stores across the above-mentioned regions.
We believe that PVH Corp.’s recently concluded transaction furthers its plans to concentrate on higher-margin businesses rather than lower-margin products to drive long-term growth and enhance shareholder value.
In consistence with this strategy, in Oct 2013, the company formed a joint venture (:JV) with Gazal Corp. Ltd. – a leading apparel supplier and retailer in Australasia – to expand PVH Corp.’s Calvin Klein brand across Australia, New Zealand and the South Pacific nations and islands.
The JV has been named PVH Brands Australia Pty. Ltd. and it will operate, manage and distribute Calvin Klein products across the aforementioned nations. The JV is expected to commence its operations on Feb 3, 2014 and will have a 20-year licensing period.
We believe that PVH Corp. is moving in the right direction, which will help it to exploit opportunities in the lifestyle apparel market. However, lingering macroeconomic factors could dampen the company’s growth in the near term.
Other Stocks to Consider
Currently, PVH Corp. carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include G-III Apparel Group, Ltd. (GIII), Hanesbrands Inc. (HBI) and Michael Kors Holdings Ltd. (KORS). While G-III Apparel sports a Zacks Rank #1 (Strong Buy), Hanesbrands and Michael Kors have a Zacks Rank #2 (Buy).