NEW YORK — It's back to business at Tommy Hilfiger Corp.
A day after revealing the U.S. Attorney's Office has ceased investigating its commission rates, and that it will pay additional federal income taxes and interest of $18.1 million, Hilfiger trumpeted some of its brighter spots, namely the European business and Karl Lagerfeld. The company also explained the steps it's taking to try to turn around its struggling wholesale business.
Wall Street reacted favorably to the news, sending shares of Hilfiger's stock up $1.43, or 10.5 percent, to close at $15.01 Thursday on the New York Stock Exchange.
On a conference call with analysts Thursday morning, David Dyer, president and chief executive officer of Hilfiger, said the European business continues to represent a huge opportunity.
"Europe is just a terrific business," said Dyer, noting the two countries where Hilfiger performs best are Germany and Spain. "Business there continues to be very, very strong. In Spain, it is perhaps the only place that we have a major department store in Europe. Mostly, European distribution is through 3,500 specialty store doors."
In Germany, Hilfiger has done well with both its wholesale accounts and company-owned, full-price specialty stores, and the firm plans to continue to roll out specialty stores there, he said.
Since acquiring its Italian distributor, Hilfiger has opened a facility in Milan that serves as a showroom, office and retail space. But the firm still has a long way to go to catch up to its competitor, Ralph Lauren.
"One of the things that we know from what we have seen comparing ourselves to Ralph Lauren, while we are stronger in many countries, Italy is one that we are not. We're probably about a third of their [Polo] business in Italy, and we think that it gives us the feeling that there's great growth opportunity," said Dyer.
He said Hilfiger is just beginning to enter Eastern Europe, and hasn't touched Scandinavia at all.
Turning to its struggling wholesale business in the U.S., where first-quarter wholesale revenue dropped 29.4 percent to $115 million from $163 million, Dyer attributed $12 million of the reduction to exiting the young men's jeans and H Hilfiger wholesale business during 2005. Still, he said, the company continues to reduce door count.
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