A Natural Fit for PVH

 | Oct 31, 2012 | 7:27 AM EDT  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

pvh

,

wrc

Just when you thought that PVH (PVH) had rung the last dollar bill out of its brilliant Tommy Hilfiger purchase a few years back, lightning strikes again this morning when PVH announced that it is buying Warnaco (WRC) for $2.9 billion, or $51.75 in cash and 0.1822 in stock a share.

The acquisition of Warnaco, which has the use of Calvin Klein jeans and underwear licenses, will cause analysts to raise numbers rather dramatically instantly and even bigger in the out years if you simply extrapolate how much PVH was able to do for Hilfiger.

Right now the house of Calvin Klein is divided between PVH and Warnaco. This transaction allows PVH to consolidate the brands, which would be good in its own right. But what is more important is that Warnaco hasn't done a particularly good job merchandising the jeans or the underwear even as these are gigantic brands with huge profit margins. That's why even if you didn't think that PVH was going to do anything other than take in the money that Warnaco was going to get it would STILL be a good deal. But I have to believe the master merchants at PVH will do far better with Calvin jeans and underwear than the undermanaged Warnaco.

We take a day off and we see not one, the Disney–Lucas combination, but two, the PVH-Warnaco deal, and we remember that good companies are always going to use their cash and their stock to augment their earnings.

Both deals are terrific. But in the case of this PVH it's such a natural fit that it is amazing it wasn't done much earlier.

Bravo to Manny Chirico for picking up Warnaco. And may I just add that when I suggested he do this deal back on Sept. 18, I thought he needed to pay $3 billion to get it. He shaved $100 million off the price tag.

Columnist Conversations

Do I really need to tell you that overnight inventory is long as measured against Thursday day session close? ...
Starbucks' same-day delivery launch for 2015 is catching the headlines this morning. But here are some other t...
Here is what I saw in the company's holiday sales plans. All in all, the company is betting big on the U.S. c...
Lang:
On this Halloween day we reflect on a month of wide swings and volatility. Just two weeks ago it appeared the...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.