Hot! Owning Calvin Klein With Lowest Margins Points To Warnaco Merger

Manny Chirico, chief executive officer of Phillips-Van Heusen Corp.,who is using acquisitions to try and turn PVH into the world s largest apparel company, may target Warnaco. Photographer: Daniel Acker/Bloomberg

July 1 (Bloomberg) Emanuel "Manny" Chirico, chief executive officer of Phillips-Van Heusen Corp., talks about the clothing company's acquisition strategy and growth outlook. Chirico, speaking on Bloomberg Television's "InBusiness With Margaret Brennan," also discusses the impact of manufacturing costs on retail prices and the integration of acquired brands such as Tommy Hilfiger and Calvin Klein . (Source: Bloomberg)

PVH Corp., owner of the Calvin Klein and Tommy Hilfiger labels, may find a takeover of Warnaco Group Inc. (WRC) the cheapest way to boost operating margins that lag behind all of its biggest competitors.

PVH will aggressively look for acquisitions, Chief Executive Officer Emanuel Chirico said in a Bloomberg Television interview this month. The New York-based company earns less than 9 cents in operating income per dollar of sales, the lowest among its rivals including Polo Ralph Lauren Corp. (RL) , according to data compiled by Bloomberg. Warnaco, which has controlled the license to sell Calvin Klein jeans since 1997, is less expensive than 93 percent of U.S. apparel companies versus earnings before interest, taxes, depreciation and amortization.

Chirico, who is using acquisitions to try and turn PVH into the world s largest apparel company, may target Warnaco after purchasing in its biggest deal, according to Penn Capital Management Co. Warnaco, which began as a maker of corsets more than a century ago, would help PVH increase sales in faster-growing markets outside the U.S. and cost at least $3 billion, . said. That would rival the amount that PVH spent to acquire Tommy Hilfiger, the second-biggest U.S. apparel takeover in history, the data show.

It makes a lot of sense, said Kevin Roche, a Philadelphia-based at Penn Capital, which oversees $6.5 billion including 65,000 PVH shares and 200,000 Warnaco shares. PVH is looking for more international exposure. PVH can definitely do something in the market and seems to be looking to. Warnaco is cheap right now.

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Daniel Gagnier, a spokesman for PVH, declined to comment. Deborah Abraham, a spokeswoman at New York-based Warnaco, didn t respond to an e-mail or telephone message requesting comment.

PVH gained 3.7 percent to $70.40 today in New York. Warnaco advanced 2.5 percent to $54.06.

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