Tommy's talking turnaround again — and still, an initial public offering.Two years after Apax Partners acquired Tommy Hilfiger for $1.6 billion, Fred Gehring, the company's chief executive officer, today will unveil financial results for the year ended March 31 that trumpet a 23.9 percent surge in earnings before interest, taxes, depreciation and amortization to 268 million euros, or $377 million at average exchange, on sales that grew 14.4 percent to 1.34 billion euros, or $1.88 billion. The Amsterdam-based privately held company partly attributed the rise in sales to Hilfiger's strong retail and wholesale business in Europe — sales in the region grew 22.8 percent to 707 million euros, or $996 million, during the year.However, an upbeat Gehring said he saw the highlight of the results as the company's growth in the U.S., which he called the firm's "shining star." Sales there rose 3.8 percent to 454 million euros, or $640 million, during the period. Sales in North America as a whole, for the U.S. and Canada, rose 2.5 percent to 590 million euros, or $836 million, during the period."Where we were facing a challenge to really do some things differently was in the States," said Gehring, referring to the brand's position in the U.S. when Apax acquired Tommy Hilfiger in May 2006. "We've focused on fewer product divisions...and product of a higher quality at a higher price point level. We of course realized there was a risk that the American consumer may not buy Tommy Hilfiger at substantially higher price points than they've been used to, but we found that they did."There's no question, the last few years have been challenging for Hilfiger's firm as it underwent a catharsis of sorts. While the European business delivered consistent growth at a premium position for many years, the U.S. wholesale business floundered after being oversaturated in the market. After Apax acquired the brand, Gehring, formerly head of Tommy Hilfiger's successful European operations, was appointed ceo of Hilfiger. He set about radically slimming down the business, cutting jobs and bringing some of Hilfiger's licensed businesses in-house. Gehring has tried to reenergize the company and extend the brand to the premium positioning it enjoys in Asia and Eastern Europe.
Gehring, with Hilfiger on board as the designer and public face of the brand, set out to open a series of Hilfiger stores across Europe's toniest shopping streets. The company unveiled a store on Paris' Rue Saint-Honoré in 2006, swiftly followed by a wood-paneled flagship on London's Regent Street, which stands alongside brands including Aquascutum, Burberry and Brooks Brothers on the shopping thoroughfare. Similar Tommy Hilfiger units are slated to open in the U.S., too, with a 22,000-square-foot flagship set to make its debut on Fifth Avenue in New York in November and a Miami store scheduled to open this summer. But its biggest gamble in the U.S. was striking an exclusive deal with Macy's for women's, men's and children's sportswear, which will be rolled out to 550 Macy's units this fall.Sales at Tommy Hilfiger 206 retail stores in the U.S. (more than 150 of which are outlet stores) rose 6.7 percent on a comparable-store basis during the year, and the brand saw double-digit sales growth with its business at Macy's, the company said. That growth was mitigated by an 11.4 percent decline in wholesale net revenue in the U.S., as the company discontinued orders and product lines in preparation for selling Tommy Hilfiger sportswear exclusively at Macy's this fall. The company's results also were boosted by bringing its Japanese license and European footwear license in-house.Presently, the U.S. accounts for 35 percent of the business; Europe is 50 percent, and the remainder is other international business."[Going private] has benefited the organization in that...there was a level of reorganization that is very, very hard to do in the public domain, where every quarter you have to report," said Gehring. "Now that we are behind that, I don't think from a brand perspective there's any advantage of being private...it may be more effective to be public as you have more of a transparency, which is great when you're doing well. That in itself is kind of advertising." Gehring said that, after the brand postponed its IPO at the beginning of the year, because of volatility in the financial markets, the company had "shelved" plans to float, pending market conditions.
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