New Delhi/Bangalore: American apparel-maker Tommy Hilfiger plans to add 500 stores in India over the next five years to capitalize on the brand's surging popularity, the company has told the Department of Industrial Policy and Promotion (DIPP), the nodal agency that clears such foreign investments.
Tommy Hilfiger Arvind Fashion Pvt Ltd, a 50:50 joint venture between the US premium lifestyle brand and Ahmedabad-based Arvind Ltd, will invest Rs 60 crore in 45 company-owned stores; a significant number of the stores will be opened through franchisees, according to a foreign investment application filed by the company and reviewed by ET.
Currently, Tommy Hilfiger operates 58 franchisee outlets and over 60 shop-in-shops in other department stores. The expansion will take Tommy Hilfiger's presence to 631 points of sale by 2016-17.
Both partners will invest Rs 15 crore each, whilst Rs 30 crore will come from the company's internal accruals, the alliance said in its application to the DIPP.
"Engaging in retail operations directly would enable the applicant company to set up retail stores in locations all over the country including in those which at present are found commercially unfeasible by our franchisee partners," the application said.
"The company will announce its concrete plans in due course," Jayesh Shah, director & CFO of Arvind said, without commenting on specific queries.
A year ago, Tommy Hilfiger had bought out the 50% stake of the Murjani group in a joint venture called Arvind Murjani Brands, which owned the franchisee rights for the American brand in India. The Murjani group held the Tommy Hilfiger trademark licence in India.
In 2011 the JV applied to the Registrar of Companies for a change of name from Arvind Murjani Brands to Tommy Hilfiger Arvind Fashion with an authorized share capital of Rs 20 crores. Now, the alliance has filed an application with the DIPP seeking approval to open Tommy Hilfiger branded stores in India via the window for single-brand retailing.
Tommy Hilfiger Arvind Fashion is bullish on India as the brand has shown "robust financial performance" over the years and clocked total sales of Rs 80 crore for the fiscal year ending March 2011. Revenue is expected to have swelled four times to Rs 320 crores for the fiscal year ended March 2012, the documents filed by the company to the DIPP said.
Nearly 17 per cent of the $40-billion Indian apparel market is organised, management consulting firm Technopak Advisors estimates.
The $4.6-billion Tommy Hilfiger, a unit of PVH Corp, also owns brands such as Calvin Klein, Van Heusen (the Indian rights are owned by Madura Fashion & Lifestyle), and operates more than 1,000 stores in over 90 countries in North and South America, Europe, Asia Pacific among others.
Tommy Hilfiger has been one of the early movers among international lifestyle brands, having entered India in 2003. "It has stayed away from much discounting and created a loyal following across metro cities," Arun Sirdeshmukh, former CEO of Reliance Trends and co-founder of portal Fashionara, says. "But given their premium positioning it remains to be seen if there is a market for an additional 500 stores," he adds.
Meantime, in a separate DIPP application, French fashion brand Promod SAS has filed for a 51 per cent stake in a joint venture with local Modex Trading Pvt. Ltd. Modex is co-owned by Tushar Ved, the promoter of Major Brands, which currently owns Promod's franchisee rights in India.
Retail analysts say the brand had low recall value before it launched in India and a limited footprint, which is slated to change with the JV. "Promod has done fairly well in India also on the back of its mall locations, being a part of Major Brands' portfolio that includes Mango, Charles & Keith and Aldo," a rival retailer, said seeking anonymity.
The four-decade old brand, which claims to refresh its collection with 100 new products every two weeks, competes with women-centric, trendy brands such as Zara, s.Oliver and Esprit.
Incidentally, Madura Fashion & Lifestyle (MF&L) too is in the process of converting the distribution agreement it signed with Esprit in 2005 into a joint venture. "We have been in talks with Esprit and are trying to fine-tune things," Ashish Dikshit, CEO of MF&L said, without divulging details. "Our approach is to look for deep and long-term alignments," he added.
A study by management consulting firm Booz & Co revealed that around 100 multinational retail & consumer companies had entered India between 1990 and 2010. As many as 86 companies entered before 2009, and a little over a fifth of this lot (or 18 companies) changed their partnership model.
"Over the past few years, consumer brands that had followed the low-risk and low-return model through franchisees and distribution agreements, have gained confidence in the market and increased commitment," Raghav Gupta, principal at Booz & Co, says. Take for instance, UK-based retailers Clarks, and Marks & Spencer, which extended their distribution or franchise agreements into joint ventures with Future Group and Reliance Retail respectively.
