A $1B Quest: Jones Looks to Tommy, Calvin as Polo Talks Drag

Is Jones Apparel Group’s overture to Tommy Hilfiger Corp. merely a negotiating ploy to irk Ralph Lauren - or does it desperately need the business?

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Ralph Lauren

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Peter Boneparth

Photo By WWD Staff

Tommy Hilfiger

Photo By WWD Staff

NEW YORK — Is Jones Apparel Group’s overture to Tommy Hilfiger Corp. merely a negotiating ploy to irk Ralph Lauren — or does it desperately need the business?

Jones, the $4.3 billion powerhouse, reportedly has held very preliminary discussions to acquire Polo’s arch rival, Tommy Hilfiger, the $1.8 billion sportswear company that has been battling erosion of its core men’s wear business. Neither Hilfiger nor Jones officials would comment Thursday on the report, which appeared in The Wall Street Journal. Investors seemed pleased with the idea, driving shares of Hilfiger up $1.41, or 23.9 percent, to close at $7.30 on the New York Stock Exchange.

But, if Jones maintains its payment record, a purchase of Hilfiger could cost from $1.5 billion to $2 billion.

Plus Hilfiger isn’t the only designer Jones is in talks with. Sources said the group is aggressively pursuing a Calvin Klein better price women’s sportswear license from Phillips-Van Heusen Corp.

Jones is anxious to find a backup for its licensed Polo business, which contributes more than $1 billion to its sales. As reported, Jones and Polo are in discussions about the renewal of some of those licenses — talks that, sources said, are increasingly acrimonious.

Jones’ ability to retain the licenses is looking less likely, said sources. A spokeswoman for Polo Ralph Lauren Corp., said, "We do not comment on any ongoing business discussions."

One of the possible outcomes of the dispute is that Polo will take the Lauren, Ralph and Polo Jeans businesses in-house. Sources have indicated that Polo has already taken three additional floors at 550 Seventh Avenue here to accommodate the Lauren and Ralph businesses.

"Polo has a strong sense it can do it all themselves," said one source. However, some observers question whether Polo has the infrastructure to manufacture and distribute the lines itself.

The crux of the matter is that the three licensed businesses account for more than $1 billion in sales at Jones. Should Polo take them back, Jones will be left with a $1 billion hole to fill and would have to replace it quickly. Consequently, Jones is frantically trying to line up other businesses to take their place. While the Hilfiger business would add additional volume, one source said it won’t help the profit picture. "It’s a sign of desperation on Jones’ part…you’ll replace the volume, but it won’t do anything to the bottom line."
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