NEW YORK — Talk about change.
This year has seen many for Tommy Hilfiger Corp., and changes will only continue. On May 10, Apax Partners purchased the $1.7 billion sportswear company for $1.6 billion, and a major restructuring is under way.
A few weeks after the acquisition, Hilfiger outlined a consolidation of operations under which some 230 people were let go because of a new organizational structure and worldwide leadership team. As part of the restructuring, the brand’s corporate headquarters, which were in New York, relocated to Amsterdam. Other initiatives include the closure of the H Hilfiger vertical retailing business and the ending of the children’s wear collection apart from selling it within Hilfiger stores.
Fred Gehring, the former head of Hilfiger’s European operations who took over as global chief executive officer of Hilfiger following the company’s sale, said a reorganization was necessary to restore the position of the Hilfiger brand in the U.S.
“One of our first priorities has been to assess our worldwide organization so that we are best positioned to execute our plans of elevating the Tommy Hilfiger brand in the U.S. and capitalizing on the premium positioning that we have built globally,” said Gehring, who plans to move to New York later this summer.
U.S. management in New York and New Jersey has already begun to be minimized. The people working on the closing of the H Hilfiger business, which the company once saw as the key to a comeback in the U.S., will be redirected to focus on the development of Hilfiger’s full-price freestanding retail stores carrying Tommy Hilfiger items, as well as a line of products specifically designed for those stores.
Also, after a much anticipated launch of the Karl Lagerfeld contemporary women’s and men’s line, Hilfiger abruptly pulled the plug on Lagerfeld’s New York operation, firing 25 employees. Lagerfeld, which was acquired by Hilfiger’s company in January 2005, will continue to be a subsidiary.
In addition, Hilfiger himself will still be involved with the brand, but will be free to spend time on his numerous TV and movie projects. His brother, Andy Hilfiger, recently gave up day-to-day involvement in his company, Sweetface Fashion, to return to Hilfiger’s firm as senior vice president of music and entertainment. Andy Hilfiger, who is credited with laying the groundwork for Hilfiger’s connections to the hip-hop and rock ‘n’ roll worlds, had been away from the company for the past five years.
Andy Hilfiger’s role will be to combine music, entertainment and fashion and form strategic alliances with other companies, films and sports.
At the time of his brother’s rehiring, Tommy said, “For 10 years, Andy was responsible for many of the company’s breakthrough initiatives combining the worlds of music and fashion. His wealth of knowledge and constant enthusiasm will be a vital contribution to the new era of our company.”
Tommy himself continues to have a hand in the advertising of his brand. The new fall ad campaign was shot by Dewey Nicks in Canada’s frozen Yukon. “The setting of this campaign is much more extreme and dramatic than in previous seasons,” Hilfiger said late last month. “This adds a sense of allure and drama to the imagery, and ultimately to the product.” The ads will appear in August fashion magazines.
So, do market observers believe Hilfiger’s business has a chance at a turnaround? Feelings are mixed.
“There’s still a strong consumer franchise out there for the brand,” said Harry Bernard, executive vice president and chief marketing officer at Colton Bernard Inc., the San Francisco-based consulting firm. “In the U.S. market, my feeling is that the best bet for the brand would be for it to be shifted to moderate distribution on an exclusive basis, similar to the deal with Mossimo and Target. Stores like this are large enough to give the company the volume, and the customers will be receptive.”
Bernard said that product-wise, the Hilfiger brand has tried to change its focus too many times, which could be too damaging for the brand. “He tried so desperately at one point to be another Polo,” he said. “But we have one Polo and don’t need another.”
On the other hand, Laurence C. Leeds, chairman of Buckingham Capital Management, said that with these new partners, the Tommy Hilfiger brand will be just fine.
“The brand is far stronger in Europe and in the Far East than it ever has been,” he said. “I am sure the U.S. won’t be far behind. I think these partners will be great for the brand, it gives a new opportunity for them to take their time and build it right … without the Wall Street pressures. Tommy, I can tell you, is very excited and invigorated. He is thrilled with these new partners.”