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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The source added that Polo appears ready to reabsorb the licensed businesses at Jones, and that former Jones president Jackwyn Nemerov, who enjoyed a close working relationship with Ralph Lauren and the crew at Polo, might be in line for a position at Polo.

One thing’s for sure: if the Lauren brands stay at Jones, there’s no way Ralph Lauren will allow Jones to take on the Hilfiger business. In 2001, Jones had to curtail its discussions with Calvin Klein for a better price women’s line because of Lauren’s strong objections.

Some market watchers say a deal between Jones and Hilfiger is intriguing and could have some benefits.

Marshal Cohen, a president of NPDFashionworld, Port Washington, N.Y. market research firm, observed, "A Jones acquisition of Hilfiger has major over-reaching implications in the market. The good news is it will take care of a major part of what Tommy needs. It can provide help on the infrastructure issues. Not only does Hilfiger have a branding issue, but it has a logistics issue. It’s a more competitive environment, and it has merchandise speed issues. The Jones group is adept at that. It will also give them international clout on purchasing."

In addition, Cohen pointed out it would be a win for the Jones group. "It gets them entrenched in the men’s business in a bigger and better way. It also provides a whole other level of power branding within the retail community. If you’re doing a licensing deal, you’re now going in talking about several power brands.

"The downside is you’re no longer an independent brand, but Jones and Liz [Claiborne] have allowed the businesses to maintain their image and identity," said Cohen.

For years the darling in the industry, Hilfiger has seen its fortunes erode as the label became over-distributed, the company grew too quickly, and a highly promotional retail environment hurt sales. These days, Hilfiger is seen as particularly vulnerable to a takeover because it is sitting on $400 million in cash and has experienced weak sales and declining market share in its core men’s wear business. Further, Hilfiger’s co-chairmen Lawrence Stroll and Silas Chou both stepped down last year to pursue other business opportunities, and the firm has been searching for a ceo to replace Joel Horowitz, who said he wouldn’t renew his contract when it expires in March 2004. Horowitz was named chairman of the company earlier this year. Herbert Mines Associates, the search firm, was hired to conduct the ceo search, and the firm is reportedly looking both inside and outside the apparel industry.
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