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Li & Fung to create "supply chain of the future" for PVH

Hong Kong-based global sourcing specialist Li & Fung has inked a new deal to create the "supply chain of the future" for PVH Corp, owner of the Tommy Hilfiger and Calvin Klein brands.

The strategic partnership announced today (24 March) replaces the current non-exclusive buying agency agreement between the two companies, and will see Li & Fung provide additional value-added services to PVH to help speed reaction time and capitalise more on digital, data and personalisation trends in retail.

"Our focus is to create a more effective and efficient supply chain that will enable us to adapt and evolve so we can stay ahead in our rapidly changing industry," explains Daniel Grieder, CEO of Tommy Hilfiger Global and PVH Europe. "This transformation in our sourcing strategy is an important step in our initiative to improve speed to market and for the faster integration of consumer insights into our new collections."

The transaction, which is expected to be mutually beneficial to both companies, is due to close on 1 July.

"We believe they [Li & Fung] can bring to us some real value added services from a speed, efficiency model," PVH COO and CFO, Mike Shaffer, told analysts.

"It does a couple of things for us. Long-term, it gives us the opportunity to reduce some of our buying commissions as we go forward as we are taking more direct control of the business jointly.

"And then secondarily it's really from a speed point of view the initiatives – the ability for us to really take advantage of speed-to-market [and] quicker reaction time. From that point of view it's all very positive. So I think that changing relationship will be good for both companies."

The comments came as PVH Corp revealed fourth quarter results that exceeded both sales and earnings guidance, despite a 25.1% drop in net income to US$100.5m. Revenue in the three months to 29 January was flat with the prior year at US$2.1bn. PVH's Tommy Hilfiger business recorded the highest revenue growth at 3% to $932m, while Calvin Klein fell 1% to $795m and Heritage Brands dropped 5% to $381m.

Also speaking on the analyst call, Chirico outlined the company's digital ambitions, explaining that the recently announced acquisition of True&Co, a direct-to-consumer intimate apparel e-commerce retailer, "will enable us to further participate in this fast growing online channel and provides a platform to increase innovation, data-driven decisions and speed in the way we serve our consumers.

"We believe that over time we will also be able to leverage the mindset and expertise of this model across our other apparel businesses."

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