China to Become Calvin Klein’s Biggest Asian Market

Calvin Klein, the largest brand owned by Phillips-Van Heusen Corp., expects sales in China to increase as much as 30 percent annually over the next three years, making the nation its biggest Asian market.

“China is still a very small part” of Calvin Klein’s global business, Tom Murry, the brand’s president and chief executive officer, said in an interview in Shanghai today. If the brand can maintain sales growth of between 20 and 30 percent a year, “it’s going to become a major business for us.”

Calvin Klein will open at least 15 stores in China in 2010, increasing the total to about 115, Murry said. The new outlets may boost sales in the world’s most populous nation to as much as $200 million this year, compared with $170 million in 2009. China is its fastest-growing market, he said.

“We’re expecting Phillips-Van Heusen to remain focused on Asia as a growth opportunity,” said Jeffrey P. Klinefelter, an analyst at Minneapolis-based Piper Jaffray Cos. who rates the shares “neutral.” “There’s a handful of fashion brands well-positioned to capture the rapidly growing disposable income of affluent Chinese, and Calvin Klein is one of them.”

Phillips Van-Heusen declined 54 cents to $63.71 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have gained 57 percent this year.

Rapid Economic Growth

Luxury retailers are investing in China to benefit from rapid economic growth and increasing numbers of wealthy shoppers keen to buy global brands. China’s economy grew 11.9 percent from a year earlier, the biggest three-month gain since the second quarter of 2007, the government’s statistics bureau said yesterday.

To raise awareness of the brand in China, Calvin Klein will increase spending on advertising 15 percent this year. It raised global ad spending 10 percent in 2009.

Calvin Klein expects sales in China this year to be higher than those in South Korea, the brand’s biggest Asian market, Murry said. Japan ranked third last year.

Calvin Klein’s sales in Asia grew by “double digits” in 2009, according to Phillips-Van Heusen Chairman and Chief Executive Officer Emanuel Chirico. Phillips-Van Heusen, based in New York, plans to expand global Calvin Klein sales to as much as $10 billion in the next five years, from “just under” $6 billion now, Chirico said in a teleconference call on April 14.

About half of Calvin Klein’s sales come from countries outside the U.S., Murry said.

Retail sales in the U.S. increased 1.6 percent last month, more than anticipated and the biggest gain in four months, the U.S. Commerce Department said on April 14.

Still, the relatively slow pace of growth in retail sales represents “a very significant change in the trend of consumer consumption in the U.S.,” Murry said today.

Americans will begin to spend money on luxury goods again now that the recession is over, he said.

“It doesn’t mean it’ll be a straight line recovery,” he said. “It’s going to be a jagged line.”

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