TOMMY HILFIGER: IT’S WORKING IN EUROPE
Byline: James Fallon
AMSTERDAM — Tommy Hilfiger’s red, white and blue is skyrocketing across Europe.
While the designer continues to retune his company in the U.S., Hilfiger’s European business is getting stronger. He entered the European market four years ago in a licensing deal with Pepe Jeans London Corp., which is owned by Lawrence Stroll and Silas Chou. The two also are Hilfiger’s co-chairmen and their Sportswear Holdings Ltd. owns 5.9 percent of Tommy Hilfiger Corp.
“Today the business in Europe is well ahead of $100 million and is growing at 50 percent a year,” Fred Gehring, chief executive officer of Tommy Hilfiger Europe BV, said in an exclusive interview here with WWD. “We believe we can grow by 30, 40 or 50 percent a year for the foreseeable future.”
The growth has come despite the fact that Hilfiger concentrated on men’s sportswear in its first two years, followed by the launch of women’s and men’s denim 18 months ago. His women’s sportswear, children’s wear and Hilfiger Athletic lines were introduced in Europe in limited distribution last fall and are now being rolled out.
“Things are really kicking into place for fall,” Gehring said, sitting in his office overlooking one of Amsterdam’s many canals. “It will be the first season that all five divisions are represented with a full presence.”
For example, distribution of women’s sportswear will increase to about 700 doors this fall from only 100 last fall. In addition, Tommy Hilfiger recently opened a European showroom here to service its key accounts. The four-floor showroom is in the former auction rooms and offices of Sotheby’s. Other local showrooms have been opened in Dusseldorf, Munich, Zurich, Salzburg, Paris, Madrid and London.
Hilfiger also has signed distribution agreements in Italy, Turkey, Greece, Portugal and Norway and each of the distributors has opened a local showroom, Gehring said.
Europe is Hilfiger’s largest overseas market in terms of sales and distribution, with more than 2,000 doors in 21 countries. The growth in Europe mirrors the brand’s development in other markets outside the U.S. Hilfiger’s licensee in Latin America, American Sportswear, distributes the brand in 28 countries in Central America and South America, and in the Caribbean with more than 200 points of sale that include 40 freestanding stores and one flagship in Sao Paulo, Brazil.
Tommy Hilfiger Japan launched in 1992 and has 130 points of sale, mainly through department stores. The Japanese licensee currently sells only men’s sportswear and jeans and clothes for boys in sizes 4-7 and 8-20, but will introduce junior jeans for fall. Dickson Poon was granted exclusive distribution rights for the brand in Hong Kong and Taiwan three years ago and currently has 24 points of sale, including a 20,000-square-foot store in Hong Kong.
The international licensees, last year, contributed about 6 percent of the group’s combined revenues on a wholesale-equivalent basis, a Hilfiger spokesman in New York said. Tommy Hilfiger Corp. had total revenues in fiscal 2000 of $1.9 billion.
Now that Hilfiger has done the groundwork in Europe, the company is preparing for a major expansion. The rollout includes the opening of a series of freestanding Tommy Hilfiger flagships throughout Europe. But the new format is substantially smaller than Hilfiger’s ill-fated, 16,000-square-foot flagship on London’s New Bond Street, which opened in 1999 and was closed a year later after the parent group’s profits and sales declined. The new strategy is to focus on flagships of 2,500 to 5,000 square feet, with a key requirement that they be for profits, rather than simply for image.
The first of the new-format stores opened here this month on P.C. Hoofstraat, one of the premier shopping streets that is also home to stores for Gucci, Versace, Cartier and Hugo Boss. The two-floor unit, which has 2,300 square feet of selling space, carries all five of Hilfiger’s categories. A franchised store, in the same format, opened in Antwerp, Belgium, this month. Two stores in Italy will follow in the next few weeks. These will join Hilfiger’s existing stores in Europe: 15 in Turkey, five in Greece, two in Portugal, one in London and one in Saint-Tropez. Many of these stores are operated by the company’s local distributor.
In addition, Hilfiger has opened a string of corners in department stores in the U.K. with retailers such as Selfridges, House of Fraser, Harrods and Harvey Nichols; in France, with Galleries Lafayette and Printemps; in Spain, with El Corte Ingles, and in Ireland, with Brown Thomas.
“Men’s wear, currently, is in about 1,200 doors in Europe and women’s wear eventually could be in that many,” Gehring said. “In the U.S., in-store shops probably represent about 70 percent of the business or more. But in Europe, we can’t say, ‘OK, let’s open another 100 department store doors.’ There are a number of department stores we can still open, but to grow, we need to go to the high street [main street].
“The plan is to open 75 stores in Europe over the next three years, many franchised, but some owned by us,” he added.
The plan covers only Tommy Hilfiger stores. The company currently is developing a separate, freestanding, retail concept for the designer’s Hilfiger Denim collections in Europe, which mirror Tommy Jeans in the U.S. The first of those stores is expected to open in Europe later this year, although Gehring declined to reveal further details at this stage.
Hilfiger Europe relaunched the designer’s denim lines last season, based on the concept of his original store in New York, called People’s Place, which Hilfiger opened as a teenager. The concept, which also is being used in in-store shops, includes facsimile posters, tops bearing the People’s Place slogan and photos of Hilfiger outside the store in the late Sixties and early Seventies.
Hilfiger Europe’s largest single market is Germany, which represents about 20 percent of sales, followed by the U.K. and Spain, which each account for 15 percent of sales. Other strong markets include the Benelux countries, France, Austria and Switzerland and, eventually, Italy. Gehring believes Italy could become the company’s second-largest market after Germany. Two more stores will open in Italy this fall and the local distributor, Incom Group, plans to open 20 freestanding stores and a string of in-store shops over the next two years.
As with many American designers, it has taken Hilfiger time to work out the formula for his collections in Europe and other overseas markets. While about 80 percent of the products sold are the same as in the U.S., Hilfiger is increasingly adapting his collections to fit standards in Europe, Central America, South America and the Far East in terms of size, color and fabric. For example, design teams in Amsterdam develop European styles in women’s and men’s sportswear, the Hilfiger Denim line and Hilfiger Athletic. The design teams then meet with their American counterparts, with all European designs being approved by Hilfiger before they go into production.
In addition, Hilfiger’s men’s tailored collection is produced under license in Europe by the men’s wear company Strellson of Germany. Gehring said that at some point the company could launch a women’s tailored line in Europe, although there are no plans at the moment to do so.
The Hilfiger women’s wear customer in Europe is slightly older than her American counterpart — about 28 and older. As a result, the women’s European fall sportswear line offers more tailored designs that can be worn to the office. There also is an extensive program of leather coats, pants, skirts, jackets and a large collection of handknits and scarves, all of which are exclusive to Europe. Most of the Hilfiger Denim collection also is exclusive to Europe.
“As an American brand coming to Europe, you have to be aware first of the differences between America and Europe and, second, between eastern and western and northern and southern Europe,” Gehring said. “For newcomers, it can take a long time to realize and, in some cases, they never do, which is why some American companies coming to Europe have not always been successful.
“About 50 percent of the products we sell in sportswear is exclusive to Europe, with some of the changes relatively minor. The real dedicated, designed product could be as little as 15 percent. But that contribution makes the difference between success and failure.”
Hilfiger’s sales in Europe are based almost completely on his core apparel lines. The only one of his licensed products sold in Europe at this point is his fragrance and body line, which is produced by Aramis. Movado launched its Tommy Hilfiger timepiece collections at the Basel Fair this month.
“We put licensees on hold while we positioned the brand properly ourselves,” Gehring said. “There’s been a lot of interest and I foresee, in the next 12 months, a significant program of European licensing — underwear, shoes, accessories, socks+they will be the top companies in their field, as with the perfume license.”
In Gehring’s view, Hilfiger hasn’t even scratched the surface of its potential in Europe. He doesn’t think Hilfiger can ever be as big in Europe as it is in the U.S., but it can come close.
“We see a definitely reachable sales horizon of $500 million in Europe,” he said.
“Could it reach $1 billion? I can’t comprehend that,” Gehring added, before grabbing a calculator to determine how long it would take at growth rates of 30 percent a year — his answer being seven years.
“Well, including licensed products, maybe. Certainly, Europe is a big space and we now have all five divisions. Let’s just say the sky’s the limit.”