NEW YORK — Women’s wear is making Tommy run — and it has big plans in plus sizes and misses’.Accounting-related charges pushed Tommy Hilfiger’s first-quarter results $438.8 million into the red, but signs of gross-margin improvement helped the firm outperform Wall Street’s expectations and push its stock up 9 percent Monday.The sportswear company also announced that longtime co-chairman and director Lawrence Stroll has resigned to pursue other interests.For the three months ended June 30, income before the cumulative effect of a change in accounting principle and a one-time deferred tax charge was $2.6 million, or 3 cents a diluted share, compared with $9 million, or 10 cents, in the same year-ago quarter. Excluding the accounting change, analysts had expected a break-even performance by Tommy. Including the change in accounting for goodwill and intangible assets and the noncash tax charge, the company lost $438.8 million, or $4.88 a share, in the quarter.A substantial improvement in gross margins, which rose 194 basis points to 44.6 percent, improved the quarter’s profile dramatically and offset declines in its men’s wear business, which is now smaller than its women’s wear wholesaling operation. Tommy’s stock closed at $13.30, up $1.10, in New York Stock Exchange trading Monday.The accounting change, the result of Statement of Financial Accounting Standards No. 142, affects how the company amortizes goodwill or intangible assets having indefinite lives. The impairment of goodwill in the quarter was $430 million, or $4.78 per share. The deferred tax liability, also relating to the accounting change, totaled $11.4 million for the quarter. The quarter’s results also reflect an expected seasonal operating loss for the quarter for the Tommy Hilfiger Europe operations, which the fashion firm acquired on July 5, 2001.Lehman Brothers analyst Robert Drbul said that the charge was in line with expectations and is comparable to what other fashion firms have been doing to adjust to the new accounting protocol. While the analyst said that the charge was for a number of different items, including trademarks, one financial source specifically pointed to the 1998 Pepe Jeans acquisition and its goodwill implications.Despite a double-digit dip in its men’s wear business, sales in the quarter were up 3 percent to $366.3 million from $355.7 million last year.David Lamer, an analyst at Ferris, Baker Watts, said, "Tommy had a very good quarter, with improvement on their gross margins. I am encouraged that the gross margins will continue to improve another 250 to 350 basis points over the next three quarters."The analyst said that the quarter was a good one for the firm, which was busy "tightly controlling its top line to control its inventory, which in turn is boosting its bottom-line results."Also contributing to the gross margin increase, according to Lehman’s Drbul, was the significant reduction in the amount of goods sold in the off-price channels in the United States.Joel Horowitz, chief executive officer, said during a conference call with analysts that the company will be paying about $6 million to $7 million more in taxes because of an increase in New Jersey’s state tax. In spite of the increase, the company is still projecting earnings per share of 61 cents for the second quarter ending on Sept. 30. Full-year guidance was upped to $1.67, 3 cents above earlier estimates, to reflect higher than expected first-quarter earnings over the earlier estimate.According to Lamer, "Tommy’s guidance of $1.67, including the N.J. tax hit, is both cautious and conservative and does not account for any improvement in men’s wear. Men’s wear wholesale sales were down 21.9 percent, in line with expectations. As long as Tommy plans that part of the business to be down, and gross margin improvement stays on track, the $1.67 assumes that the men’s sector will remain challenging at wholesale."Horowitz said during the call that wholesale revenues in the misses and juniors business increased in the quarter by 28 percent to $107 million from $83.4 million, while men’s revenues dropped 21.9 percent to $100.8 million from $129 million. Men’s wear wholesale categories contribute 28 percent to the company’s total revenues, analysts said. Sales in children’s wear were up 3 percent to $58.8 million from $57 million.Licensing revenue was down 6.9 percent to $13.1 million from $14 million due to consolidation and the acquisition of Tommy Europe. In retail, revenue was up 20 percent to $86.7 million from $72.3 million. At the end of June 30, the total store count including Tommy Europe stores was 172, consisting of 111 outlet stores and 61 specialty licensing sites. Comparable-store sales at outlet company-owned stores declined in the mid-single digits, but margins were slightly better due to more full-priced selling and leaner inventory.According to the ceo, the addition of TH Woman, its plus-size line, contributed significantly in the quarter. "In plus sizes, we continue to expand our footprints. The initial strategy when we entered this business a year ago was to establish ourself as a denim resource. We continue to expand our offerings to include sports. In the fall [we will be in] more than 700 doors compared with 250 doors when we launched a year ago."Horowitz said that the company will grow the misses business by increasing the sportswear element and introducing an activewear component. "This includes the creation of lifestyle shops in approximately 120 select doors where we will merchandise our comprehensive offering of denim, sportswear and active product," Horowitz noted. "Approximately half of these shops will be updated with new fixturing to display the newest assortment of merchandise and product, which will reach the floors in early August." As for juniors, the ceo said that starting with the back-to-school season the company will introduce a new jean delivery every month that will update a denim wash or fit for the customer.However, if the misses and juniors categories were bright spots at retail, men’s wear was Tommy’s albatross in the quarter.Horowitz disclosed, "The men’s sportswear business continues to be challenging, and largely promotion-driven. In conjunction with the category weakness, we have experienced our own product issues in the spring-summer season." He noted that the company took aggressive measures to clear inventory and get the sales floor ready for fall product offerings.The ceo quipped, "I never thought I’d see the day when men’s wear has a higher markdown rate than women’s wear, and here we are and that’s the reality."Horowitz was optimistic about the company’s future, but not necessarily as positive about the retail climate on a near-term basis. "While the economic environment is quite challenging, can we foresee a continuation of the highly promotional retail climate? We expect the momentum in our women’s businesses to continue, and we are encouraged by some recent positive trends in men’s jeans and children’s wear. We are eager to see the results of our initiatives and the redesign of our men’s sportswear and re-merchandising of our retail specialty stores beginning in the fall, although the initiatives will come against the backdrop of some uncertainty and sagging consumer confidence," he said.As for Stroll’s resignation, Lamer observed, "Stroll has been working on Asprey & Garrard for the last 18 months. Now he will focus on that entirely. It will have no operational impact on the Tommy whatsoever."According to Tommy’s latest annual report filed in May with the Securities and Exchange Commission, Stroll retains a 1.1 percent ownership stake in Tommy.Lamer didn’t rule out the possibility that Stroll, now without any potential conflict of interest, might want to take a closer look at Calvin Klein Inc. should that business be put back on the market. Lehman’s Drbul didn’t think that was likely anytime soon, as long as Stroll was still heavily focused on Asprey. However, Drbul advised, "I would keep a close eye on what Silas Chou does because, if Stroll was keen on acquiring CKI, he would likely do it in partnership with Chou."Both Stroll and Chou bought Asprey in July 2000 from the Brunei Investment Agency for an undisclosed sum — although industry observers estimated it at less than $152 million. The two, until Monday’s announcement, were co-chairman of Tommy. Chou also retains a 1.1 percent stake in Tommy.

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