THE HILFIGER ENIGMA: AN EMPIRE IN SEARCH OF ITS LATEST IDENTITY
Byline: Lisa Lockwood / With contributions from Anne D’Innocenzio
NEW YORK — He can’t get no…satisfaction.
Or so it would seem for Tommy Hilfiger, who, these days, is going through ad agencies faster than new heartthrobs are hitting the pop charts.
Certainly, ad agencies live under the oppression of constant review, and fashion can be as fickle as any industry, but Hilfiger’s moves of late suggest a company that’s not only wrestling with incredible growth, but it’s a company that may be facing an identity crisis — brought on by that very same growth.
Even Hilfiger, as honorary chairman of what is characterized in the industry as a $1.7 billion “machine,” concedes he’s at something of a crossroads, trying to figure out how to build a strong fashion image when each of his numerous businesses are targeted to different demographics and mindsets.
Is he preppy classic? Hip and urban? Pure rocker?
And does this multiple identity point to a more significant challenge: An attempt to stay a step ahead of relative upstarts like Abercrombie & Fitch, American Eagle, Fubu and others.
“Our business is getting so big,” Hilfiger acknowledged in a recent interview. “We have 30 divisions now, and each division has a different requirement in many cases. We ask ourselves, ‘Should we be young, or more traditional? Should we go more hip or more casual?”
That question isn’t easily answered, and his latest ad shakeup promises at least two things — more connections with the music/entertainment world, and something “wild.”
His recent ad moves involved an unusual deal with VH1 to produce commercials, a split with Peter Arnell, and the signing on of Deutsch Inc., the hot New York ad agency noted for its TV work for Ikea, Snapple and Mitsubishi Motors. Last spring, Kirshenbaum, Bond & Partners was brought in to work on juniors, jeans, home and kids. Deutsch and Kirshenbaum will split the different divisions and the VH1 arrangement, though innovative, appears to be a one-shot deal.
Hilfiger is given credit by the ad and fashion communities for masterfully bridging the commercial/entertainment gap, particularly the past few seasons, but he’s managed to move on every few seasons, just when the image might be getting stale.
It’s a trip that’s taken Tommy from oblivion to Norman Rockwell to Lenny Kravitz — with a challenge to the Goodyear Blimp in between.
First there was George Lois, credited with putting Hilfiger on the map in 1985 via a brash ad campaign comparing the fledgling men’s wear designer with Ralph Lauren, Perry Ellis and Calvin Klein. Then came a seven-year run with Toth Brand Imaging that gave Hilfiger credibility as an all-American designer, and more recently, Arnell Brand Consulting, which capitalized on Hilfiger’s ties to rock ‘n’ roll and entertainment.
Hilfiger appears to be getting itchy again, and the recent naming of Deutsch came without a formal review. Deutsch, in fact, did some work for Hilfiger in 1998, when he created a Super Bowl commercial for the designer featuring Michael Richards, (Kramer on “Seinfeld”).
Last year, Hilfiger conducted a formal review with six agencies to replace Toth, which chose not to participate.
Although Deutsch was a clear favorite last year of Peter Connolly, president of worldwide marketing at Hilfiger (who had previously worked with Deutsch when he was an executive at Ikea), Hilfiger chose Arnell.
But after a 14-month relationship that produced some highly controversial and publicity-driven campaigns, as well as some big time alliances with Miramax, the Rolling Stones and Britney Spears, Arnell and Hilfiger called it quits.
Although Deutsch, with $1 billion in billings, doesn’t have a lot of experience in the fashion world, it did create the original Old Navy TV ads with Jerry Hall and has previously created some campaigns for Louis Vuitton. It was also the first agency to feature a gay couple in an Ikea TV ad.
The move signifies the growing power that Connolly is wielding at Hilfiger and that Connolly is expected to call most of the shots with Deutsch and Kirshenbaum.
But a key question remains: Does the tinkering with image signal a deeper problem?
According to sources, all is not peaceful in the house of Hilfiger, where the corporation is facing some intense competition — cited again and again are Old Navy, Abercrombie & Fitch and American Eagle, whose specialty store operations are stealing momentum from the once red-hot men’s wear business. And Hilfiger’s women’s jeanswear business is faced with stiff competition from new players such as Polo Jeans, DKNY Jeans and urban lines such as Enyce and Fubu.
When faced with a softness in sales in any part of the business, Hilfiger officials often like to play with the most visible part of the company — the ad campaign.
While Hilfiger executives acknowledge that the men’s wear business has matured, they are particularly optimistic about the women’s, juniors and fragrance prospects.
“Our business last year to this year is up substantially,” said Hilfiger. “Like all the other brands, we’re maturing in some areas and have high growth in others. The fact that we’re maturing in men’s is no secret, but men’s jeans is on a high growth path. Women’s is growing extremely well and juniors has tremendous growth.” He said fragrances, cosmetics and licensed accessories are also on the upswing.
Hilfiger admitted that he’s revamping his men’s wear. Though offering few specifics, Hilfiger noted, “We’re modernizing it without abandoning my roots.”
Last spring, the company said its women’s business continues to be the main driver of Hilfiger’s growth. Accounting for 17 percent of Hilfiger’s volume, that number is expected to increase to 24 percent next year.
Joel Horowitz, president of Hilfiger, said “We’re on track with our women’s plan. We’re very happy with the new direction in the missy section of the women’s business.” He said the women’s business this fall is broken up into three different segments: Spa Group of knit dressing; American Casuals, which is misses’ jeanswear, and Modern Basics. “It’s selling nicely for fall,” said Horowitz, who noted that the logos this fall were deemphasized.
The logo issue is a thorny one for Hilfiger. A few years ago, the designer experimented with more discreet logos and it backfired with the consumer, causing the company to quickly switch back to logo-driven sportswear.
Hilfiger executives are confident they’ll hit their numbers. Horowitz said the second quarter’s financial data won’t be released until Nov. 3, so the company is in a quiet period, but he pointed out that Hilfiger is still generating double-digit growth.
“Spring bookings are doing very nicely,” he said. “Men’s is a mature business, and the growth rate is down to very low single digits, but we’re still eking out some growth.”
Overall, he said, “we’re on plan to where we expected to be.”
Horowitz said all the ad agency turmoil “had nothing to do with how our existing businesses were…It’s a matter of being able to have an agency provide what we require and being such a large client today. We now have two agencies, and we can get more ideas. We are such a large client with all our different busineses. They require different ideas. We do segment our brand into so many demographic pieces. Other brands give the consumer one message. We really give multiple messages to our consumer, based on demos.”
Horowitz said the company would still have one big umbrella image, which he said is the TV campaign produced by VH1’s in-house department. That image links up directly with the pop/rock scene and features Jewel and Lenny Kravitz, with voiceovers of Hilfiger talking about how music inspires him.
“In the last year, [the advertising] hasn’t been difficult at all because it all tied into music,” explained Hilfiger. “Going forward, in developing all these businesses, we want to have a consistent identity. We want a big buy on TV, and we had to go to an agency that specializes in TV advertising, in addition to the music TV ads we’re doing with VH1.” Hilfiger’s advertising the past year has received mixed reviews. While some ad experts gushed over the authentic rock ‘n’ roll imagery juxtaposed with fashion shots, detractors felt they seemed contrived and didn’t necessarily enhance the designer’s credibility. Some observers believe all the musical promotional activities may have overshadowed the brand’s personality. More recently, Hilfiger’s spring show at Madison Square Garden took some critical knocks for being more rock extravaganza than fashion vision.
Arnell was key to building the music-related campaigns, and whether they’re ultimately deemed successful, both Arnell and Hilfiger took the high road in describing their collaboration, despite reports that some of Arnell’s recent ideas were rejected. Arnell says he resigned the account; others say he was fired.
“I think Peter [Arnell] did a very good job,” said Hilfiger. “I think he’s extremely creative. The White House campaign certainly made history. ‘The Faculty’ ads were historical, and the Rolling Stones campaign made history. Jewel and Lenny Kravitz were in keeping with the Year of Music.”
Arnell, chairman of AG, formerly Arnell Group Brand Consulting, said, “We were given opportunities and got involved with developing and inventing new venues and new platforms for his media in a way that had not been done before,” namely, the entertainment tie-ins.
“There was an extraordinary and powerful relationship that allowed excitement and energy to infiltrate the brand and marketing on a global basis,” said Arnell.
Asked if there was too much promotional activity that was interfering with building the brand, Arnell said, “People get excited over exciting things. The whole notion of co-marketing with entertainment is a powerful thing. It was the first time we saw powerful marketing in entertainment-based alliances work in such a deep way to the market, to build a voice for the company.”
In describing the new division of labor, Hilfiger’s Connolly told WWD that Deutsch will be responsible for the ad campaigns for women’s and men’s sportswear, footwear, accessories, socks, men’s and women’s Collection, tailored clothing and accessories, eyewear and a new Hilfiger line of dressy clothing for men to be launched next fall.
Kirshenbaum Bond & Partners will do the ads for Tommy Jeans, junior sportswear, children’s wear, home, robes and sleepwear, underwear and golf.
It hasn’t been determined yet which of the two firms — Kirshenbaum or Deutsch — will get the assignment for the Freedom fragrance.
“Freedom’s been very successful, and we’ve modernized Tommy and Tommy Girl,” said Hilfiger.
“We’re looking at going to a whole new level of advertising,” the designer added. “To have more than one agency is very convenient to us. It will supply us with a constant flow of creativity to choose from.”
Discussing the latest agency change, Hilfiger said, “It’s almost like a rebirth — what we do every couple of years.
“I’m jaded in a sense,” he continued. “Over the years I’ve been involved with some of the great creative geniuses from George Lois to Mike Toth to Peter Arnell to Richard Kirshenbaum and now Donny Deutsch. I’m accustomed to having great advertising and I’m not going to settle for less. It’s one of the most important aspects to building the brand.”
Asked how he will coordinate the work from Deutsch and Kirshenbaum so that the two campaigns don’t clash, Hilfiger said, “That’s my job. It’s the most difficult task. There has to be a point of difference among the different collections. Jeans will be younger and edgier, Collection will be more sophisticated, and sportswear is happy and sexy. The different licensed products should be product specific with consistent imagery.
“As an example, in jeanswear, we have real strong competition. We have to be in the game. If the game is about showing fashion, we have to show it in a great way. The jeans skew younger. Juniors is emerging as one of our largest divisions. They need their own identity,” Hilfiger stressed.
Although he’s not considered an overly demanding client, sources said Hilfiger doesn’t always know what he wants until he sees it. And sometimes, he may really love an idea, but then gets swayed by other Hilfiger officials.
Generally, it’s not the ad agencies that run out of ideas, but the relationship falls apart. Sources say that while Arnell and Hilfiger got along well, Arnell and Connolly never clicked.
Now it’s up to Deutsch and Kirshenbaum to see if they can bring a cohesive identity to the brand that, for the better part of this decade, has shot up like a rocket.
It’s not that Hilfiger has run cold with his core teen following, but some retailers, analysts and trendsetters said that the brand may be losing some edge as it becomes increasingly mass distributed.
It is also facing some hefty competition. Abercrombie & Fitch, for example, rolled out its first TV campaign this fall, and has been an aggressive marketer of the collegiate chic look.
In addition, Hilfiger, which has enjoyed a loyal following among urban customers, is being faced with competition from a host of fast-expanding urban brands, particularly Enyce and Fubu, which offer an authentic urban heritage. These brands also have designs on becoming megabrands. For example, Fubu Ladies is rapidly expanding beyond streetwear into clubwear and activewear, and is launching a licensed shoe line for spring.
According to Northbrook, Ill.-based Teenage Research Unlimited, Tommy Hilfiger peaked at the number two spot for fall 1997 on what it calls its “cool brand barometer,” moving down to the number three position for spring 1998. Nike is ranked number one, while Adidas is number two. The “cool” barometer is based on opinions of 2,000 teens, who are surveyed twice a year about their favorite brands.
“Tommy has been able to maintain interest in the teen market by stepping up promotions with musicians,” said Michael Wood, vice president at Teen Research Unlimited. “But he better watch out. The market is so volatile. Things change pretty quickly. When it comes to fashion brands, teens are attracted to whatever is the latest.”
Nipping at Hilfiger’s heels, Wood reiterated Old Navy and Abercrombie & Fitch, which has moved up the cool barometer, from number eight to six. A year ago, A&F wasn’t even in the top 10, according to Wood.
Critics claim that Hilfiger may be expanding in too many different directions, wanting to appeal to the teen, the working woman, and the designer customer+with a taste for $1,400 red python leather pants. Hilfiger’s latest: A better career collection is making its debut for fall 2000.
“The problem is that a lot of people don’t understand the Tommy Hilfiger brand; he forgot who the customer is,” said DeeDee Gordon, a trend consultant who produces the L Report, which analyzes what’s hot among teens.
Gordon also added that Hilfiger is sending a confusing message by associating himself with an eclectic mix of musicians, from Lenny Kravitz to Jewel. “They don’t connect back to the brand,” she said.
Whatever the image agenda, there’s one indisputable fact about Hilfiger: He’s a Wall Street darling, especially by fashion industry standards.
Faye Landes, an analyst with Thomas Weisel Partners, an investment firm, continues to be a big believer. “I think as a brand gets big, it runs a risk of overexposure,” observed Landes. “But [Hilfiger executives] are constantly fine tuning, and issues do not fester.”
She added, “There’s no sense that the brand is stale. Certainly in a company, you are not going to get things cooking all at once.”
And a current report from Credit Suisse First Boston rates Hilfiger’s stock a “strong buy.”
Although Hilfiger’s stock has dropped 33 percent in the past six weeks due to concerns over retail sales of its men’s jeans, men’s sportswear and women’s sportswear, Credit Suisse expects Hilfiger to continue its streak of reporting better-than-expected results when earnings are released Nov. 3. The report, released Wednesday, noted that men’s jeans’ sales slowed in July and August, but have improved in September. It reported that men’s sportswear sales are trending single digits below last year. Last year included $12 million of closeout sales. The decline is in line with plan.
The Credit Suisse report notes that one of three new women’s sportswear groups, Modern Classics, has experienced below-plan sales because it was too item-driven. New deliveries include more coordinated outfits, and sales have improved since mid-September. Credit Suisse noted that sales are above plan for the two other women’s sportswear groups, Spa and American Casuals, as well as junior jeans, children’s and outlet stores.
Meanwhile, Baltimore-based investment firm Ferris Baker Watts Tuesday downgraded Hilfiger’s stock from a “strong buy” rating to “outperform,” based on “below average” feedback from retailers regarding its men’s business, according to analyst Joseph Teklits.
Teklits, who pointed out that Hilfiger missed the vest trend that competitors and chains jumped on, said he is lowering his revenue growth estimates for Hilfiger’s total men’s business from 8 percent to 5 percent for the remainder of the fiscal year 2000, and to 4 percent for fiscal 2001.
He added that he is looking for women’s to grow by 30 percent for 2001 in order for Hilfiger to reach its earnings expectations.
“It’s going to put more pressure on the new women’s launches to be successful. It won’t leave much room for error.”
Hilfiger’s women’s and men’s products have gotten widely varied reviews from some of its accounts.
Kathy Bufano, executive vice president of Macy’s East, said that Tommy Jeans has done exceptionally well, with such bestsellers as dark rinse designs and black jeans, but she acknowledged that Tommy Hilfiger’s sell-throughs this fall have been slow, due to lack of logo merchandise, which was edited out to avoid cannibilization with Tommy Jeans.
“Tommy’s trademark isn’t apparent in the missy line for fall,” Bufano said. She added that for spring, the better line has a good balance of traditional “grown-up clothes” mixed with logo merchandise, and she is confident that sell-throughs will improve.
“We are very bullish on Tommy,” Bufano said. “Manufac-turers do have their ups and downs. This was just a blip.”
“Oversaturation usually kills a brand, and that is what is happening to Hilfiger,” said Beverly Rice, senior vice president of fashion and merchandising strategy at Jacobson’s, based in Jackson, Mich.
“The line is overdistributed; it is everywhere,” Rice continued. “There needs to be more discipline.”
Rice said that she is starting to see brands such as Polo Jeans and Paris Blues eat into Tommy Jeans’s market share, while several contemporary labels have taken away some business from Tommy Hilfiger, its better sportswear collection.
Durand Guion, men’s fashion director at Macy’s West, said that initially the jeans launch “took some thunder” out of the men’s and women’s sportswear, but he believes that the business has rebounded. “Business has definitely improved and the brand remains strong,” he said.
Guion added, however, that Abercrombie & Fitch and Old Navy are increasingly becoming challenges to the juniors floor in department stores. “They have brilliant campaigns, and the stores are compelling,” he said.
The success of those campaigns will no doubt put extra pressure on Tommy’s agencies.
Donny Deutsch, chairman and chief executive officer of Deutsch Inc., is clearly thrilled with his new Hilfiger assignment. “Once again, it’s nice to arrive to a home run,” said Deutsch, whose agency employs 700 people.
“It’s one of the great brands in America,” said Deutsch, noting that he plans to maximize Hilfiger’s equities. Deutsch said the company is at the early stages of planning next spring’s campaign, and wasn’t ready to divulge details.
Both Deutsch and Hilfiger agree there will be a music component. “He’s been a pioneer, and doing music is very much a part of Tommy’s ethos. It’ll be there,” said Deutsch.
“Music is certainly a part of my image and we plan to keep it that way. I wouldn’t abandon our strong ties with music,” said Hilfiger. “I believe we’ve built a lot of equity with it. I haven’t decided which way to turn it. I really like creative meetings to look at all the different angles.”
Asked how far along they’ve come in developing a new campaign, Hilfiger said, “Right now, we’re at the drawing board. We’re going through an analysis of what’s happening with every brand. It comes at an interesting time. We’re modernizing our in-store shops, production process and my men’s and women’s products,” said Hilfiger.
While Hilfiger is not sure if he’s looking for a campaign that’s funny, serious or brash, he said he’s clearly interested in advertising that cuts through the clutter.
“It’s something we’ve done in the past, and I don’t want to give that up,” said Hilfiger. Nor has Hilfiger decided if he will continue to use his main model, Rebecca Romijn-Stamos, in his advertising.
“As for what he hopes to do for Hilfiger, Deutsch said, “I think you’ll see a real wild factor there. He [Hilfiger] will continue to build on the awareness and there’ll be exciting stuff coming from him.”
But deadlines are looming: Hilfiger said he’ll need to have an ad campaign ready before Thanksgiving.
Hilfiger said he’ll probably do less print, and move more of his budget to TV. “I’ll chose my important print vehicles.”
Industry executives estimate Hilfiger will spend about $90 million in advertising during 1999, and that number is expected to increase next year with the launch of a juniors and women’s career sportswear line.
According to Competitive Media Reporting, Hilfiger spent $35.8 million last year in media alone. For the first half, he spent $17.8 million, up 10.7 percent from a year ago.
Hilfiger said he’s also a strong believer in marketing directly to the consumer. His own “super” web site is expected to be up and running in early 2000, but it won’t handle e-commerce, lest he unsettle his valuable department store franchise.
Deutsch, who is a personal friend of Kirshenbaum, believes the two creative shops will work well together. “Tommy is in a lot of different businesses, and there’s an essence about youth. They don’t all need to look the same, but they have a kindred spirit.” He said other companies, such as Nike, have different executions for their women’s apparel or basketball advertising. “Jeans are talking to a different audience than, obviously, his tailored clothing line,” said Deutsch.
Deutsch said Kathy Delaney, executive creative director of Deutsch, and Craig Markus, creative director, will spearhead the account. “They’ll be working on it, and I’ll put 20 folks against it.”
“It’s the best of youth and the possibilities,” said Deutsch. “A smart brand marketer understands their box and continues to build in it. I don’t think humor works [in fashion advertising], but relevance, wit and charm do. I don’t think fashion is funny.”
Hilfiger said he’s excited by the prospect of fully modernizing the brand.
“We, the Tommy Hilfiger Corp., view ourselves as a global lifestyle brand. Applying that to our advertising is very important. It’s much bigger than apparel advertising or jeans advertising. We’re bigger than that. We’re looking at it from a totally different viewpoint and it’s very important to the company.”