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NEW YORK — Tommy is taking his own sweet time.

Despite mounting pressure from Wall Street to name a new chief executive officer and make acquisitions, Tommy Hilfiger, honorary chairman of his eponymous firm, figures he still has plenty of time to replace Joel Horowitz, who plans to give up the ceo post when his contract expires in March. And Hilfiger doesn’t want to rush into any acquisitions that don’t feel right.

This story first appeared in the July 7, 2003 issue of WWD. Subscribe Today.

“Wall Street is always anxious. They want us to spend all our money on an acquisition, whether it’s right or wrong,” said Hilfiger in an exclusive interview with WWD. “They want us to put a ceo in place yesterday. We have to do what is right for the brand and the corporation.

“We’re looking at all different opportunities [for acquisitions]. There’s nothing at the forefront,” he said.

Hilfiger, whose core men’s wear brand has been battling market erosion and whose products have been greatly over-exposed in department stores, admits the company needs fixing, but believes there are still plenty of opportunities to grow.

Among them are launching a new women’s casual career line, H Hilfiger, for department store distribution and adding more dressy categories to the women’s offerings. In addition, Hilfiger sees plenty of international growth left for the company, especially in women’s apparel. He said he’s beginning to see a “turn in men’s already with the new product,” and the company is redeveloping much of Tommy Jeans.

“At the end of the day, it’s all about the product,” he said.

For the last fiscal year, Hilfiger sustained a massive $513.6 million loss, or $5.68 a diluted share, compared with income of $134.5 million, or $1.49, the previous year. The loss was due mostly to a $430 million charge reflecting the cumulative effect of a change in accounting principle. Revenues inched up 0.6 percent to $1.89 billion from $1.88 billion a year earlier.

According to the company’s annual report, released last month, Hilfiger’s women’s wear, up 4.9 percent to $564.7 million in revenues, was the largest segment of the company’s wholesale business in the last fiscal year, outpacing men’s wear for the first time, which saw its revenues decline 10.8 percent to $555.1 million, as reported. Hilfiger, as noted, has about $420 million in cash, and in May hired J.P. Morgan Chase to assist it in acquiring additional brands.

With rumors swirling daily about what company Tommy Hilfiger Corp. will acquire — or whether Hilfiger itself will be acquired — the designer wants to set the record straight:

He’s not making a bid for Nautica Enterprises;

Buying Sweetface Fashions is a possibility,

He doesn’t want to sell his company to Jones Apparel Group, VF Corp. — or any other firm for that matter.

“I have too much energy,” said Hilfiger. “At the same time, I love my brand and couldn’t imagine someone taking over. I could love another brand also if it fits with the multibrand and multi-channel strategy. It would not be competitive, but would bring added value and an enhancement [to my business].”

As reported, Hilfiger’s employment contract says the firm and its subsidiaries “cannot enter into any line of business” that the designer feels would be detrimental to the company’s trademarks. “One thing’s for sure,” said Hilfiger, “we’re going to make a very good choice. I don’t want to be hasty. I don’t want to do it because we have cash in our pockets. It has to be right for the shareholders and the growth of Tommy Hilfiger. If we don’t make an acquisition, so be it. I’m not going to feel forced to do it. We have healthy substantial businesses within Tommy Hilfiger.”

Last year, Hilfiger finished at the pinnacle of the 2001 compensation sweepstakes among apparel executives with $24.9 million in salary and bonuses, a 7 percent decline from the prior year.

So, first things first: Why doesn’t he want to make a run for Nautica?

“We already have a place in that segment. It wouldn’t give us the diversification I would need,” said Hilfiger.

And as far as Sweetface, he said, “Because it’s JLo [whose co-founder and director is his brother Andy], we’re familiar with how that business is run. We wouldn’t have to do the same type of due diligence. They’re doing so well on their own. They have so much growth, and they’re taking advantage of it. It is on the list of possibilities; however, nothing looks imminent.”

So what would whet his appetite?

“New opportunities are being presented to me every day. In reality, we are focusing on the strength of our house and still are looking for the right ceo candidate. I would like to make sure that before Joel’s contract is up, I have that person in place, with a certain amount of time working with Joel under his belt —even though Joel said he’d stay on as long as we want him to,” explained Hilfiger. He noted he probably wouldn’t make an acquisition without the new ceo in place.

Meanwhile, the designer still sees growth potential for the Hilfiger brand, especially in the women’s area.

“Believe it or not, there are a lot of growth opportunities of which we’ve never taken advantage. Growing the women’s is an enormous opportunity. We’ve really succeeded with women’s, but not to the extent we can if we really put horsepower behind it. We view ourselves as a global brand. There’s growth in Europe. It’s very substantial, and more than any other division,” he said. Europe contributed a total of $275.8 million to 2003 revenues, above expectations and 44.2 percent above the previous year, excluding currency fluctuations.

One area he’d like to cultivate is casual career, and he’d like to make a play for the Lauren by Ralph Lauren area in department stores — real estate that Jones New York, CK Calvin Klein and, of course, Polo’s Lauren line are all going after as well.

“We’re only in casual. We’ve never been in the dressier career business,” said Hilfiger. “Casual career is the thought at the moment with department stores — as a result of the Lauren/Jones situation.” Presently, one-third of Hilfiger’s total business is in women’s apparel (with men’s, children’s, retail and licensing comprising the rest) and 65 percent of the women’s business is in jeans and jeans-related casualwear, Hilfiger pointed out.

“The question marks surrounding Lauren and Jones will spell opportunity with a Big O,” said Hilfiger. “Department stores will clear out space. Now, it’s a new ballgame, and everyone will scramble,” he said.

“It opens up a wide opportunity. We’re quite established in casual. We’ve never done suits. It’s a big opportunity,” said the designer. “Jones has its way of doing things, Calvin will have his way, and we’ll have ours. It’ll be more fun,” he said. Hilfiger said he won’t license the line, but will produce it in-house. “We’re extremely capable in our manufacturing and production system,” he said.

Hilfiger said the company currently manufactures and markets the H Hilfiger women’s line for its own specialty stores, and is considering rolling it out to department stores. “We have a dressy collection for our own specialty stores and it’s been very successful,” he said. He noted that the company has been working on the H women’s line for more than 18 months. “We’re talking about when it should hit department stores. The project is very much alive. It’s a matter of pulling the trigger and deciding when to offer it,” he said.

The line is overseen by Hilfiger’s sister, Ginny. It is run by Gary Sheinbaum, president of TH Retail, in collaboration with Christa Michalaros, who is president of misses’ sportswear, junior jeans and TH Woman.

Last fall, Hilfiger announced it would close 37 of its 44 U.S. specialty stores. Today the company has seven full-price stores in California, Florida, New Jersey and New York. Internationally, there are 293 freestanding stores in such cities as London, Montreal, Moscow, Dusseldorf, Saint-Tropez, Istanbul, Amsterdam, Antwerp, Athens, Tel Aviv, Israel, and Fukuoka, Japan. The company also has 107 outlet stores.

Some industry observers believe one of Hilfiger’s problems is that the company has ignored its inner-city ethnic customers and failed to connect with them, especially when it opened a lavish 19,000-square-foot flagship on New Bond Street in London and a 20,000-square-foot showcase store on Rodeo Drive in Beverly Hills. Both of those stores have closed. But Hilfiger feels these stores were necessary for his image. “You always need an image vehicle to enhance the global viewpoint of the brand. You do it through flagship stores, models and advertising,” he said.

He said part of the company’s men’s wear problem was agreeing to do too many products that department stores requested. “They were asking us to do things, and were asking other companies, too. We got caught in ‘same-itis.’ If a store said it needed more plaid shirts, we said, “OK,’ but that’s not what the customer wanted. The store would go to Nautica and Polo, too, and ask for the same things. During the last few years, you couldn’t tell the difference between Tommy, Polo and Nautica,” said Hilfiger.

In women’s wear, Hilfiger’s sister, Ginny, remains the muse. “She designs what she wants to wear and what the customer wants to buy. That’s one of the reasons it’s been so successful,” he said.

Hilfiger said his separate H line in men’s wear has done very well because it’s more sophisticated, more grown up and geared to Hilfiger’s specialty stores. “It has sold extremely well,” he said.

Turning back to acquisitions, Hilfiger said his investment bankers have presented him with a lot of different companies. “It’s like looking for a house. You can look and look and look, and when you walk into a house, you love how it feels and you know it’s right,” he said. One thing is certain: Hilfiger doesn’t want an acquisition that goes head-to-head with his company.

“I will not compete against my own brand. There is something out there, or there will be something that will be right. We have such a global presence and such a strong infrastructure in Europe. To buy something just for the U.S. market wouldn’t be the right fit. I’m not in a race to do this. I don’t have a deadline. Our cash is not going away. There’s more coming in. I want to make sure it’s the right thing for our shareholders and our corporation without neglecting Tommy Hilfiger because Tommy Hilfiger is an alive, breathing, strong brand that can continue to have opportunities.

“Will it have the kind of growth we had in the Nineties, when we were seeing gains of 25 to 30 percent, and 37 to 40 percent? No, never. If Tommy Hilfiger could get single-digit growth…It’s a very stable company,” he added.

“I’m not saying we wouldn’t want that again [double-digit increases]. We’d only get that kind of growth with an acquisition. To make the wrong kind of acquisition would be devastating to the company,” added Hilfiger.

Hilfiger admires Paul Charron’s strategy at Liz Claiborne, and thinks Juicy Couture “is a great little company,” and Claiborne’s acquisition of it was a smart move. “I look at his [Charron’s] philosophy and Claiborne’s become a strong umbrella brand organization.” He said Jones’s strategy is to be more moderate. He admitted that he had “early conversations” with Jones early this year. “Obviously we’re not interested in selling,” he said. “We’ll look at opportunities on a continual basis, but I don’t want to sell.”

Asked why he thinks Nautica is exploring selling its company, Hilfiger said Nautica has different needs than his company. “Nautica is a brand. We’re a designer brand. We have different types of situations. Nautica doesn’t have a women’s business, we have a women’s business which is exceeding our men’s business. We have a children’s business and a licensing business. Our strength is we’re multifaceted and in men’s, women’s and children’s, and we’re very powerful in our European business,” he said.

As for the search for a new ceo, which is being handled by Herbert Mines Associates, Hilfiger said, “We’ve met a lot of different people. We’re casting a wide net. We’re looking inside and outside the industry, and it’s the way to go. Replacing a partner who’s been with me for almost 20 years is not going to be easy. I’m not in such a hurry, knowing that Joel is going to stay.”

The designer said he’s also made some changes in his advertising strategy. Maintaining his relationship with Deutsch Inc., Hilfiger has also hired Doug Lloyd of Lloyd & Co., the New York ad agency, for the women’s and men’s Collection ads, and A/R Media, a New York-based ad agency, for Tommy Jeans. Deutsch continues to do all production and trafficking worldwide. “We want to move onto a new level and feeding in some fashion creativity doesn’t hurt,” he said.

With all this weighing on his mind, Hilfiger hopes to divide his time between Nantucket and New York this summer.

“I’ve been working hard in the design room with the product and in the board room with the team to strategize for the future. I am very energized and am looking forward to the future,” said Hilfiger. “It’s a great team around me, and I listen. We have so much opportunity and it’s great to be in a position to look at all these situations.”

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