After acquiring 49 percent stake in Calvin Klein from PVH, denim wear maker Arvind is inching
towards its aim of becoming a billion dollar company. While the recent acquisition would help Arvind scale up its brand business, it would also assist in executing the long-term strategy. Taking leading in branded retail segment: After acquiring India operations of three major international apparel brands Debenhams, Next and Nautica,Arvind had signaled its strategy to grow big in the organised apparel market. For Arvind Lifestyle Brands, a subsidiary of Arvind, which already has an impressive brand line-up comprising Tommy Hilfiger, US Polo Assn, Elle, Geoffrey Beene, Arrow among others, acquiring the business operations of Debenhams has also paved the way for it into the department store segment. The company’s focus on textiles business has helped it grow revenues from the segment, which rose from 21 percent to 26 percent in FY13. Revenues from its textiles business, which includes woven, apparel and denim fabric, slid to 69 percent in FY13 from 74 percent in FY10. With the acquisition of the Calvin Klein stake, Arvind has strengthened its presence in the premium apparel category. Calvin Klein India now has revenues aggregating Rs 125 crores with an operating profit margin of 8-9 percent. This acquisition will increase Arvind's market share to 90 percent in the premium apparel category. More importantly, with the acquisition, the company will have presence across all price points of denim brands from Rs 750 to Rs 10,000. The company has a presence in 671 retail stores, 656 departmental store counters and 1,500 multi-brand outlets, coupled with its presence across price points and categories, which are expected to give a considerable boost to its sales in the next few quarters. Experts say the company's traditional business segments: woven, denim and garmenting have reached a mature stage with these segments generating EBIDTA margins of 20 percent, 19 percent and 12 percent, respectively. Analysts believe there is little scope for further increase in margins of these segments. The scope to scale up its branding business, which is now generating close to 2.5 percent EBIDTA margin, is quite high. On an average, the branding business, when it reaches a mature scale, can generate an EBIDTA margin of 22 percent. On valuation, on a one-year forward basis, Arvind is trading at price to earnings multiple of 7.9, better than its peers such as Raymond. Source: Fashion United
towards its aim of becoming a billion dollar company. While the recent acquisition would help Arvind scale up its brand business, it would also assist in executing the long-term strategy. Taking leading in branded retail segment: After acquiring India operations of three major international apparel brands Debenhams, Next and Nautica,Arvind had signaled its strategy to grow big in the organised apparel market. For Arvind Lifestyle Brands, a subsidiary of Arvind, which already has an impressive brand line-up comprising Tommy Hilfiger, US Polo Assn, Elle, Geoffrey Beene, Arrow among others, acquiring the business operations of Debenhams has also paved the way for it into the department store segment. The company’s focus on textiles business has helped it grow revenues from the segment, which rose from 21 percent to 26 percent in FY13. Revenues from its textiles business, which includes woven, apparel and denim fabric, slid to 69 percent in FY13 from 74 percent in FY10. With the acquisition of the Calvin Klein stake, Arvind has strengthened its presence in the premium apparel category. Calvin Klein India now has revenues aggregating Rs 125 crores with an operating profit margin of 8-9 percent. This acquisition will increase Arvind's market share to 90 percent in the premium apparel category. More importantly, with the acquisition, the company will have presence across all price points of denim brands from Rs 750 to Rs 10,000. The company has a presence in 671 retail stores, 656 departmental store counters and 1,500 multi-brand outlets, coupled with its presence across price points and categories, which are expected to give a considerable boost to its sales in the next few quarters. Experts say the company's traditional business segments: woven, denim and garmenting have reached a mature stage with these segments generating EBIDTA margins of 20 percent, 19 percent and 12 percent, respectively. Analysts believe there is little scope for further increase in margins of these segments. The scope to scale up its branding business, which is now generating close to 2.5 percent EBIDTA margin, is quite high. On an average, the branding business, when it reaches a mature scale, can generate an EBIDTA margin of 22 percent. On valuation, on a one-year forward basis, Arvind is trading at price to earnings multiple of 7.9, better than its peers such as Raymond. Source: Fashion United
