Tommy Hilfiger

Fred Gehring became ceo of Tommy Hilfiger Corp. and vowed to rebuild the U.S. wholesale business and continue on a fast track abroad.

NEW YORK — Fred Gehring, the new chief executive officer of Tommy Hilfiger Corp., said the $1.7 billion company is committed to rebuilding its struggling U.S. wholesale business and continuing fast-track growth overseas.

Gehring, former ceo of Tommy Hilfiger Europe, took the helm of the now privately held firm Wednesday, when Apax Partners’ funds completed its acquisition of Hilfiger for $1.6 billion in cash.

Speaking from Dubai, where Hilfiger opened a store this week, Gehring said his top priority will be to raise the quality of the U.S. product to bring it in line with the brand’s global positioning.

“One overriding principle will be to try and trade up, not overnight, and become a materially higher brand,” he said. “It will happen in due course, [a little bit] every season.”

In the U.S., Gehring said the retail and outlet business is strong and licensing is solid, but the wholesale business has struggled. “We’ll approach it with a focus on quality before quantity, and we’ll take it [the volume] down before we build it up,” he said.

In the U.S., said Gehring, “We want to focus, shrink and trade up.”

Gehring has overseen the European business, which accounts for 35 percent of Hilfiger’s worldwide business, since its launch in 1997, but he conceded that he needs to learn more about the U.S. operation.

“I’m a foreigner to the business in the U.S.,” said Gehring, who is to arrive in New York Friday and will be based at the company offices at 601 West 26th Street. Hilfiger’s new corporate headquarters will be in Holland.

Gehring said he has thoughts on how to shore up the U.S. business, but wants to speak to employees before making any decisions.

“Over the last couple of years, everything was top-line focused,” he said. “I think in a private situation, we don’t have to have an obsession with the top line anymore and can focus on quality, not quantity.”

For several years, Hilfiger has seen volume and profits erode in the U.S., as department stores cut back on the women’s and men’s collections. In the most recent quarter ended Dec. 31, income fell to $15.5 million from $20.2 million a year ago. Revenue in the quarter declined 7.9 percent to $396.6 million from $430.7 million. Hilfiger said results were partly affected by a 36.3 percent drop in U.S. wholesale volume to $107.5 million from $168.8 million because of reduced department store orders. International wholesale sales rose 4.1 percent to $80.6 million, from $77.4 million.

This story first appeared in the May 11, 2006 issue of WWD. Subscribe Today.

On the retail front, revenues gained 12.4 percent to $185.8 million from $165.3 million in the year-ago period, while same-store sales at U.S. stores increased in the low-single-digit percentage range. Licensing revenue gained 8.4 percent to $20.6 million from $19 million.

As a public company, Gehring said, Wall Street paid enormous attention to the company’s positioning in the U.S., although in Europe, China, Japan and the Middle East the brand’s positioning “is on track and the opportunity is unparalleled.” Throughout the world, the Hilfiger brand is “viewed as a premium American lifestyle brand; there’s a strong DNA, both in sportswear as well as denim,” he said.

One reason for a higher-quality product overseas is that the company has a separate European design team. Gehring believes there’s no need to have two distinct collections and said “we’ll look at harmonizing the two.”

The company has 550 full-price stores internationally “and a vast majority do great business,” he said, adding that he strongly believes there’s big opportunity for full-price retail stores in the U.S.

Gehring also sees a bright future for Karl Lagerfeld’s business, which Hilfiger acquired in December 2004. He noted that Phillips-Van Heusen, which at one point was said to be a part of the Apax/Hilfiger negotiations, was no longer involved.

Under the terms of the merger agreement, each outstanding company ordinary share was converted into the right to receive a total of $16.80 in cash, without interest. On Tuesday, the company shareholders voted to approve the merger agreement, with 55,533,374 votes for the merger agreement, 7,478,955 against the merger and 2,050 votes abstaining.

The company’s ordinary shares ceased trading on the New York Stock Exchange at the market close Wednesday at $16.78 and will be delisted.

“We are very excited as we embark on this new chapter in the evolution of our global lifestyle company,” Tommy Hilfiger, the company’s founder and principal designer, said in a statement. “In Apax Partners, we have an outstanding new partner, and we look forward to working together to take the Tommy Hilfiger brand to new heights.”

Michael Phillips, partner, Apax Partners Worldwide LLP, added, “As a private company with a powerful global brand, Tommy Hilfiger Corp. will have greater flexibility to grow the business on both the operational and financial levels.”