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NEW YORK — Retail’s better bonanza is starting to spill over into handbags.

Fueled by the success of Coach, which prides itself on offering accessible luxury and which reported a staggering 119.9 percent fourth-quarter boost in income last week, the better bag business is blossoming and 2005 looks set to become the year it reaches full flower.

Tommy Hilfiger is the latest player vying for a piece of the better bag action with his new H Hilfiger line for spring. Lauren by Ralph Lauren already has a better-priced handbag line that’s licensed to Wathne. This fall, Michael Kors’ Michael Michael Kors handbags and Etienne Aigner’s higher-priced Etienne label are being launched on department store main floors nationwide. Calvin Klein International said last week that it also is planning to launch accessories for its better-priced Calvin Klein line in a license with Accessory Network Group for spring.

The tier’s development is likely to shift the dynamics on the main floor. It could potentially steer the focus from moderate resources to high-profile, aspirational American designers, which is perhaps a reason many expect exponential growth in the sector this year and beyond. Lew Frankfort, Coach’s chairman and chief executive, said last week that the company’s internal analysis projects “at least 20 to 25 percent growth in sales of premium handbags and women’s accessories” this year.

“If you look at the parallel in the apparel market, you have a lot of strong players in the better tier, so you would think there was some room in accessories as well,” said Lori Wachs, a vice president at asset management firm Delaware Investments. “For years, we didn’t see any new players in the better market, and now Calvin Klein, Michael and H Hilfiger are coming in. You will have all these new entries which can create excitement and bring people back into the department stores.”

Last week, Hilfiger presented the first complete collection of H Hilfiger handbags at the company’s West 39th Street headquarters. The bags are expected to roll out to Federated Department Stores next spring, and Hilfiger hopes they will establish him as a force to be reckoned with in the lucrative handbag business.

This story first appeared in the August 9, 2004 issue of WWD.  Subscribe Today.

Hilfiger isn’t exactly new to handbags. The designer launched bags for his more casual Tommy Hilfiger collection with the flag on the label in holiday 1999. Since H’s launch last spring, he accessorized his apparel with a handbag here and there, but company executives said that spring ’05 will mark the official, complete launch. (Both lines are licensed to the Dickson Group of Cos., owned by Dickson Poon of Hong Kong, but Hilfiger maintains full control over the design.)

“When we launched H Hilfiger, we wanted to offer a complete collection to suit the needs of our customer’s entire lifestyle,” Hilfiger said. “The H Hilfiger handbag collection complements the H Hilfiger lifestyle, with the same level of sophistication and attention to detail that our customers have come to depend on.”

Walking through the spacious H showroom last week, the designer appeared clearly elated by the new collection, and he couldn’t help but swoon over the mix, picking up a white embossed leather bag here and pointing to a saddle brown satchel there.

“It’s a new luxury at Hilfiger,” he said. “In accessories, we have never done luxury. The woman in America wants luxury, but she wants it to be affordable and accessible, and we’re giving it to her.”

In contrast to Hilfiger’s core Flag handbag collection, H handbags are made of fine Italian leathers with a focus on quality hardware details, from chunky metal rings to thick grommets, exaggerated rivets and H-emblazoned rectangular closures.

“For our H handbags, we use more luxurious [fabrics], predominantly leather, and they are more stylized with a strong focus on femininity and detailing,” said Hilfiger. “There is a great emphasis on signature hardware and detailing, such as piping, great color, hand-feel and contrast stitching.”

Looks include a green top handle handbag with yellow piping and edges; a burnt-orange rectangular leather bag with three front flap pockets; a white leather and raffia straw shoulder handbag; an awning stripe tote bag, and a white leather handbag embossed to look like crocodile skin.

“A woman can wear a white shirt, a pair of vintage Levi’s and flip-flops, but she can make it her own with a real bag,” Hilfiger said. “They’re a necessity in a woman’s wardrobe. She can be well dressed, but if she has the wrong bag, forget it.”

At wholesale prices from $36.96 to $146.16, the handbags will sit with Coach, Dooney & Bourke and Michael on the department store main floor, and the line was designed to work with the new H footwear collection, which is licensed to The Stride Rite Corp. and wholesales from $40.50 to $60.75.

“The customer who is looking for quality, sophistication and distinctiveness is our target,” Hilfiger said. “She is less casual than the Tommy Hilfiger customer, more fashionable, more fashion-forward and is between 25 and 30. Her style is a little younger than the dressy career shopper, a little more relaxed and casual but career-focused.”

Hilfiger declined to give sales projections for the line. But clearly the company is banking on H products to regain its momentum. Last week, Tommy Hilfiger Corp. reported that first-quarter revenues fell 10.5 percent to $328.6 million from $367.2 million last year, and the company incurred a loss of $7.6 million versus $17 million in income a year ago. Results were impacted by the decline in the company’s wholesale segment, which fell to $210.5 million from $264 million. Licensing revenues gained 8 percent to $14.9 million.

During a conference call last week, David Dyer, president and ceo, said the few styles of H Hilfiger handbags produced under license for spring have performed particularly well so far.

Hilfiger said he is in the process of developing H watches with watch licensee Movado Group, though it is still in the early stages. For now, handbags take center stage.

“Bags might be more important than anything else in this day and age,” said Hilfiger. “Every woman must own many.”

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