Warnaco Group wants something to come between it and its Calvin Klein brand.
With Calvin Klein representing more than three-quarters of Warnacos revenue, the New York company says it is on the hunt to acquire a major brand to help it diversify.
Warnaco may have little choice but to aggressively target fresh brands, not just to lessen its dependence on its 44-year-old underwear and jeans label, but also to fend off possible threats of itself being acquired by the company from which it licenses the Calvin Klein name. PVH Corp., which controls the Calvin Klein brand, has made attempts over the years to acquire Warnaco, and some investors worry it will try again, said Eric Beder, an analyst with Brean Murray Carret & Co.
If Warnaco wants to be a truly global company with a domestic store base, they need to acquire a new brand that has U.S. stores, Beder said. An acquisition also would bring to an end investor speculation that Warnaco will be swallowed up by PVH.
Among the companies that may be under consideration is Liz Claiborne, which owns the Juicy Couture, Lucky Brand and Kate Spade labels, said Jeffry Aronsson, chairman of Aronsson Group in New York, which helps develop fashion brands.
These labels appeal to younger, contemporary consumers, and can both fetch high prices while sustaining their own stores, said Casey Flavin, an analyst at Hedgeye Risk Management, an independent equities research firm in New Haven, Conn. The labels are worth $2 billion, $350 million and $250 million, respectively, Flavin said.
Warnaco may also be looking at larger deals, such as going after the nearly 1,000-store specialty retail network Ann Inc., which operates 280 Ann Taylor stores and 500 LOFT stores, Aronsson said.
Representatives for Warnaco, PVH, Liz Claiborne and ANN declined to comment.
Warnaco has the cash for such a deal, Beder said. The company had $232.5 million in cash and near-cash items at the end of its fourth quarter, 22 percent more than a year earlier.
Warnaco obtained rights to the Calvin Klein brand in the 1990s. By that time, the company was being led by Linda Wachner. During her 14-year run, Wachner achieved impressive growth but eventually presided over the company entering bankruptcy in 2001, when she was fired.
Still, the legacy of the Wachner years is that the Calvin Klein rights have allowed Warnaco to make jeans, underwear and swimwear under that label and sell those in the more than 1,700 Calvin Klein stores it operates mostly internationally as well as through department stores. PVH bought Calvin Kleins company from the founding designer in 2003 and remains the main owner of the brand, producing its womens runway collection, mens shirts and ties, and other goods.
The brand generates $7.6 billion in total revenue, according to PVH.