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Tommy Hilfiger Corporation

Tommy Hilfiger Corporation

11/F, Novel Industrial Building
850-870 Lai Chi Kok Road
Cheung Sha Wan
Kowloon
Hong Kong
Telephone: (852) 2216-0668
Fax: (852) 2312-1368
Web site: http://www.tommy.com

Public Company
Incorporated:
1992
Employees: 4,900
Sales: $1.87 billion (2002)
Stock Exchanges: New York
Ticker Symbol: TOM
NAIC: 315223 Mens and Boys Cut and Sew Shirt (Except Work Shirt) Manufacturing; 315224 Mens and Boys Cut and Sew Trouser, Slack, and Jean Manufacturing; 315232 Womens and Girls Cut and Sew Blouse and Shirt Manufacturing; 315234 Womens and Girls Cut and Sew Suit, Coat, Tailored Jacket, and Skirt Manufacturing; 315999 Other Apparel Accessories and Other Apparel Manufacturing; 44819 Other Clothing Stores; 53311 Lessors of Nonfinancial Intangible Assets (except Copyrighted Works)

Tommy Hilfiger Corporation markets menswear, womenswear, and childrenswear designed by Tommy Hilfiger. Hilfiger sells a complete line of clothing from socks to shirts, swimwear, jackets, pants, belts, wallets and ties, as well as sleepwear, golf clothes, eyewear, cosmetics, bedding, and home furnishings. The company operates 15 specialty stores, ten Tommy Jeans stores, a Tommy Hilfiger Childrens store, and a dual concept store. Hilfiger also operates 102 company outlet stores that offer branded products as well as out-of-season merchandise. Tommy Hilfiger products, which bear the well known red, white, and blue logo, can also be found in department stores and are marketed in over 55 countries across the globe.

Origins

Though the company was not incorporated until 1992, its history properly begins with the fortunes of its namesake, Thomas Jacob (Tommy) Hilfiger. Born in Elmira, New York, in 1951, Hilfiger started his first clothing business while still in high school. He and two friends invested $300 in used blue jeans and sold them out of an Elmira basement. Hilfiger never attended college but built up the blue jean business into a chain of seven upstate New York stores called Peoples Place. Peoples Place sold jeans, bell bottom pants, and other clothing, as well as candles, incense, and posters. The stores were successful enough to afford Hilfiger a Porsche, but they were poorly managed. In 1977, Peoples Place was forced to declare bankruptcy. Hilfiger moved to Manhattan and tried to find work as a clothing designer. Though he had no formal training, he had designed and sold vests and sweaters for Peoples Place. He worked freelance and then started a sportswear company that went out of business after only one year. He eventually found work designing jeans for Jordache.

In 1984, Hilfiger was contacted by Mohan Murjani, an Indian textile magnate. Murjani owned the license to Gloria Vanderbilt jeans and had helped spark the craze for designer jeans in the 1970s. Murjani had an idea to update the popular preppy look associated with designer Ralph Lauren and give it a younger and more mass appeal. He chose Hilfiger to design the line for his firm, Murjani International. In the beginning, however, marketing was much more important than the actual clothes.

First Marketing Campaign in 1985

The line of Tommy Hilfiger clothing debuted in the fall of 1985 with an ad campaign that featured no clothes but declared that Hilfiger was a designer on par with Ralph Lauren, Perry Ellis, and Calvin Klein. The ads did little more than insert Hilfigers name in the pantheon. Yet this was somehow effective. The brashness of the strategy attracted attention in the fashion industry and caused comment by Johnny Carson and other notables. The first ads were centered around New York City, using print and outdoor media. By 1987, the Hilfiger line was attracting more national attention with advertisements in People, USA Today, Newsweek, GQ, Sports Illustrated, and other publications. The entire advertising budget for Hilfiger clothing was only $1.4 million, and ads appeared infrequently. They made a splash, however, with double-page spreads, and because they featured words, logos, or Hilfigers face, and no images of clothes or models, they stood out from other fashion advertisements. George Lois, who helped create the ads for the firm Lois, Pitts, Gershon, Pon/GGK, claimed in a March 1988 Marketing and Media Decisions article that he could not make Hilfigers clothes look any better than anyone elses, and therefore the ads sold an idea and not the particular fashion. According to one survey, after only two years of his ads, Hilfiger had succeeded in convincing 68 percent of sampled New Yorkers to name him as one of the top four or five important designers. Sales also attested to the brilliance of the marketing strategy. In 1986, Hilfiger brand clothing was available in 60 department stores and 25 specialty shops and brought in $32 million in retail sales. A year later, retail sales had more than doubled, to $70 million.

Though clever advertising turned Hilfiger from an unknown into a top-selling designer, it was not only the mystique of the ads that accomplished this. The clothing was for the most part casualkhaki pants and a big polo shirt being the quintessential Hilfiger outfit. There was a little more flippancy in the cut and colors than the more staid Ralph Lauren style that Murjani had set out to imitate, and the clothes retailed for a bit less than similar designer togs. Hilfiger clothes fit the trend towards more casual work clothesmany offices in the 1980s were instituting casual Fridaysso this particular niche was expanding. Hilfiger clothes became staples of college men and others in the 20- to 35-year-old age group. The clothes were well-made, well-priced, similar to an existing fashion but with enough difference to stand out, and the offbeat ad campaign ignited a craze for them.

Expanding the Label: Late 1980s

By the late 1980s, Murjani International was troubled financially. The company had also licensed Gloria Vanderbilt and the Coca-Cola brand of clothing and seemed unable to focus adequately on the Hilfiger brand, which was growing enormously. In 1988, Tommy Hilfiger, Mohan Murjani, and two others formed a new company, called Tommy Hilfiger Co. Inc., buying out Murjani International. The deal was complicated, and it took the new company almost a year to finally purchase back from Murjani the rights to the Tommy Hilfiger name. In the meantime, the company found a new financial backer in Hong Kong businessman Silas Chou. Chous firm, Novel Enterprises, was one of the largest sweater manufacturers in Asia, and the company was willing to invest money in Tommy Hilfiger Company to allow it to expand. The new principles were Chou, Hilfiger, and two former Ralph Lauren executives, Lawrence Stroll and Joel Horowitz. Mohan Murjani was out. With Chous extensive contacts in the Asian garment industry, the new company not only designed but manufactured Hilfiger clothing, using Asian factories that produced low-cost, high-quality goods.

Chou was eager to push the Hilfiger line to greater availability. Sales for the new company were only $25 million its first year, so they had fallen off quite a bit from the Murjani days. Yet Chou insisted on renting a luxurious midtown Manhattan office space as New York headquarters, surmising that things would quickly get better. They did. In the fall of 1992, the company made an initial public offering (IPO) on the New York Stock Exchange at $15 a share. Within a few months, the stock was selling at $25. Revenue for 1992 was $107 million, an astonishing increase that justified Chous hopes. Hilfiger became a Wall Street darling, with steadily increasing earnings. In November 1993, a secondary stock offering brought in $70 million. The company used this cash to expand its in-store shops and to develop new outlet stores, which would sell past-season Hilfiger garments at reduced prices.

Mid-1990s Successes

Hilfigers sales went up and up, from $107 million in 1992 to $138 million in 1993 and $227 million in 1994. There were close to 500 Tommy Hilfiger sections within department stores by the mid-1990s. About half the companys revenues came from sales at three big department store chains: Dillards, Federated, and May. Another 15 percent of sales came from the discount chains T.J. Maxx and Marshalls, which sold the outdated stock at lower prices. Hilfiger began opening its own freestanding shops as well, debuting in Stamford, Connecticut, and Columbus, Ohio.

By 1994, it seemed everyone knew who Hilfiger was. President Clinton wore Hilfiger designs, as did the Prince of Wales, rock stars Michael Jackson, Elton John, and Snoop Doggy Dogg. Perhaps the most fanatic fans of Hilfiger designs were urban youths who gave the preppy look a new twist. Hip ghetto kids began taking the essentially suburban Hilfiger clothes and wearing them in extra large sizes in eclectic mixes with sports gear. Drooping pants from which Hilfiger logo underwear peeked out was one peculiar fashion. The designer noticed the street trend and responded by making extra-large sizes labeled giant, using brighter colors, and attaching bigger and bolder logos. It was apparently what the people wanted, and sales soared. Hilfiger had achieved a remarkable level of mass appeal, with everyone from bike messengers to CEOs dressed in his designs.

Company Perspectives:

The Tommy Hilfiger Corporation is dedicated to living the spirit of the American dream. We believe: the spirit of youth is our greatest inspiration; resourcefulness is the key to value and excellence; in making quality a priority in our lives and products; by respecting one another we can reach all cultures and communities; and by being bold in our vision we continually expand our boundaries.

Sales and earnings kept going up dramatically. The company used its profits to expand in various ways. Between 1994 and 1995 Hilfiger Corporation added over 200 in-store mens shops. The company had introduced boys clothes in sizes 8 to 20, and when this line was successful it introduced a line for boys in sizes 4 to 7 in spring 1995. The company had close to 500 in-store boys shops, and planned to add more. Hilfiger licensed its name to Cypress Apparel to make robes and sleepwear and to other manufacturers licensed scarves, handkerchiefs, umbrellas, and a line of golfing clothes. Hilfiger had a presence in Japan, with 36 shops inside Japanese department stores by 1995. Also in that year, the company launched 12 in-store shops across Central and South America. A new fragrance line, produced through a licensing agreement with Estee Lauder, also sold well.

Hilfiger slowly built more freestanding stores, with six full-price and 16 discount outlet stores open by 1995. The company had to move cautiously on its own stores in order not to appear to compete with the Hilfiger shops operated by its best customers, the large department chains.

Plans to launch a line of womens clothing started and stopped. There had been an unsuccessful attempt to make womens wear when Hilfiger designs were backed by Murjani International. The designer acknowledged that he had taken on too much too soon, and womenswear was dropped. It was a logical extension of the brands popularity, however, and potentially enormously profitable. In March 1994, Tommy Hilfiger Corporation hired Jay Margolis as its new president and vice-chairman, with the specific task that he develop a womenswear line. Little over a year later, however, the company announced that it would not develop the womens line, and Margolis resigned. The company declared that bringing out its own womenswear would be prohibitively expensive, and the new plan was to find a competent licensee. The company eventually licensed womenswear to Pepe Jeans International. Hilfiger chairman Silas Chou owned the Pepe Jeans brand, and the company already produced a mens jeans line for Hilfiger. The womens line came out in the summer of 1996 at more than 400 major department store shops. Like Hilfiger menswear, the womens line was mostly sportswear and aimed for the same casual wear-to-work niche. The company also put out a womens perfume, Tommy Girl, through a licensing agreement with Estee Lauder. In other expansions, the line of boyswear was extended down into toddler and infant clothes.

Sales for 1996 were close to $500 million, and the companys earnings increased over 60 percent. Hilfiger stocks had at times been the highest traded apparel stocks on Wall Street, and investors seemed to love the companys strong growth. The danger to investors, of course, was that the enormously popular Hilfiger brand would suddenly turn stale. Fashion stocks tended to be unpredictable because apparels success was mostly dependent on a fickle public. Still, Tommy Hilfiger Corporation still seemed capable of continued expansion. Profit margins were widening, something investors looked at as an indicator of soundness. Moreover, the trend toward casual work clothing that Hilfiger had first taken advantage of was still running. One industry survey indicated that over 20 percent of offices were casual every day, not just on Friday. Workers were spending money on nice casual clothes such as Hilfiger designs, and so there did not seem to be a looming end to the clothings popularity. Also, though Hilfiger Corporation had brought out its womens line, its staple was still menswear, traditionally more stable than womens apparel. Hilfiger designs were also priced well. General consumers typically spent less than $50 on individual items of clothing, and most Hilfiger apparel was in that range. Nevertheless, Hilfiger was perceived as high quality. The company had not watered down its appeal by making the brand available at lower-end chains such as Penneys and Sears. By 1997, the company was just beginning to expand into European markets. A huge flagship store was under construction in London, and presumably there was much market potential overseas.

Tommy Hilfiger Corporation had taken a virtually unknown designer and declared him a dean of menswear on par with industry leaders Calvin Klein, Ralph Lauren, and Perry Ellis. Remarkably, consumers bought the idea and bought the clothing. A dozen years after the companys brash inaugural ads, the clothing was selling more strongly than ever, not only in the United States but in Japan, Europe, and Central and South America. The combination of guileful advertising, shrewd management, and a truly appealing and useful product brought the company to a strong global level by the mid-1990s.

Battling Competition in the New Century

In fact, Hilfigers success would continue throughout the late 1990s before coming to an abrupt halt in 2000. In 1998, the firm acquired its Canadian licensee, Tommy Hilfiger Canada, and also a portion of Pepe Jeans USA for $1.15 billion. It also launched a series of new products including a home furnishings line, the Hilfiger Athletics Fragrance for men, and an infant and toddlers line. Sales for the year climbed to $847 million and then skyrocketed to $1.63 billion just one year later. During 1999, the company moved into the bath and body products market, and also began offering a girls line, color cosmetics, the Freedom fragrances, and also came out with a line of womens handbags.

Key Dates:

1977:
Tommy Hilfigers first company, Peoples Place, declares bankruptcy.
1984:
Mohan Murjani contacts Hilfiger to design a clothing line for his firm.
1985:
The Tommy Hilfiger clothing line debuts.
1987:
Retail sales of the line reach $70 million.
1988:
Tommy Hilfiger Co. Inc. is established.
1992:
The company goes public.
1996:
The womens line debuts at over 400 major department store shops.
1998:
Hilfiger launches its bed and bath line; the firm acquires its Canadian licensees and a portion of Pepe Jeans USA for $1.15 billion.
2001:
Sales and net income falter.

The competitive nature of the fashion industry, however, caught up with Hilfiger in 2000. Stock price plummeted as the company announced that its profits for the fiscal year would fall. A 2000 Fortune magazine article summed up the companys problems, commenting that Tommy rested on its red, white, and blue laurels too long. New trendier brands (think Fubu) dominate urban fashion, while Tommys clothes fill bargain bins at Bloomingdales and Macys. The article went on to state that Hilfiger tried a host of makeover strategies that were belated and misguided. These strategies included a lackluster womens sportswear line that was supported by sponsorships of the Mary J. Blige and Sheryl Crow music concerts. These sponsorships however, did little to bolster sales of the womens line, which saw the addition of both golf and swim apparel during 2000.

After customers complained that the womenswear line was too trendy and did not fit well, Hilfiger revamped the line, going back to its basic preppy modern look. The company also brought in a slew of industry veterans, including Lynn Kohlman, a former Donna Karan executive, and Camilla Nickerson, a fashion editor from Vogue to get the division back on track. Success in this section of the market was crucial, as its menswear division was suffering from weakening sales. In fact, Bloomingdaleswith the exception of the 59th Street location in New Yorkpulled the Tommy menswear line from its brand lineup in 2001.

During 2001, a womens intimate apparel line and plus-size line was introduced. The company also generated publicity that year when Lauren Bush, the niece of President George W. Bush, began modeling Hilfiger clothing. The companys efforts appeared to pay off, and by June of that year sales in both womens and juniors sportswear and jeans was exceeding company forecasts.

During fiscal 2002, overall sales declined slightly, while net income increased by 2.7 percent to 134.5 million. Though Hilfigers impressive growth had slowed dramatically from the 1990s, the company remained a popular and well-known brand. Along with traditional advertising, the company choose to tout its image using unique methods, including the purchase of the sponsorship rights to Long Islands Jones Beach Theater, one of the most successful amphitheaters in the United States, and the sponsorship of a 50-foot sailing vessel. The ship was named the Tommy Hilfiger Freedom America yacht and would be racing in the challenging 27,000-mile, nine-month endurance Alone Around race that would launch in New York City in September 2002. For Tommy Hilfiger Corp., remaining afloat in the highly competitive, ever-changing fashion industry would no doubt prove to be just as challenging.

Principal Subsidiaries

Tommy Hilfiger U.S.A., Inc.; Tommy Hilfiger Wholesale, Inc. (United States); Torncan Investments Inc. (United States); Tommy Hilfiger Canada Inc.; Tommy Hilfiger Canada Retail Inc.; Tommy Hilfiger Canada Sales Inc.; Tommy Hilfiger Retail, LLC (United States); TH Retail, LLC (U.S.); Tommy Hilfiger Retail (UK) Company; Tommy Hilfiger Licensing, Inc. (United States); Tommy Hilfiger Hungary Ltd.; Tommy Hilfiger 485 Fifth, Inc. (United States); Tommy.com, Inc. (United States); Tommy Hilfiger E-Services, Inc. (United States); Tommy Hilfiger (Eastern Hemisphere) Limited (British Virgin Islands); Tommy Hilfiger (India) Limited; New Bauhinia Limited (British Virgin Islands); Tommy Hilfiger (HK) Limited; Wellrose Limited; THHK Womenswear Limited; THHK Jeanswear Limited; THHK Menswear Limited; THHK Junior Sportswear Limited; THHK Childrenswear Limited; T.H. International N.V.; Tommy Hilfiger Europe B.V. (Netherlands); TH UK Ltd.; TH Deutschland GmbH (Germany); TH Italia SRL (Italy); TH Belgium NV; TH France SAS; Hilfiger Stores BV (Netherlands); Hilfiger Stores SAS (France); Hilfiger Stores GmbH (Germany); Hilfiger Stores Ltd. (United Kingdom).

Principal Competitors

Calvin Klein Inc.; The Gap Inc.; Polo Ralph Lauren Corporation.

Further Reading

Alson, Amy, 7th Avenues Bad Boy, Marketing & Media Decisions, March 1988, pp. 79-82.

Borden, Mark, Why Tommy Hilfiger Tanked, Fortune, May 29, 2000, p. 52.

Bradford, Stacey L., Tommy Who? Financial World, March 18, 1997, pp. 41-44.

Brady, Jennifer L., Hilfiger Head Sees Huge Growth for Womens Line, Womens Wear Daily (WWD), October 3, 1996, p. 5.

Brown, Ed, The Street Likes Hilfigers Style, Fortune, May 29, 2000, p. 52.

Conant, Jennet, A Flashy Upstart, Newsweek, October 6, 1986, p. 68.

Cropper, Carol, Designing Earnings, Forbes, February 1, 1993, p. 105.

Doebele, Justin, A Brand Is Born, Forbes, February 26, 1996, pp. 65-66.

Dolbow, Sandra, Tommy Hilfiger Sailing Through Spring 2003, Brandweek, August 19, 2002, p. 42.

Fallon, James, Lauren Bush Stumps for Tommy Hilfiger, WWD, March 2, 2001, p. 19.

Gibbons, William, Confirm New Firm to Make, Market Tommy Hilfiger Apparel, Daily News Record, November 29, 1988, p. 7.

Green, Michelle, Kristina Johnson, and Benilda Little, With Brash Advertising and a $20 Million Boost, Tommy Hilfiger Takes on Seventh Avenue Titans, People, July 7, 1986, pp. 89-90.

Hochswender, Woody, Prep Urban, Esquire, March 1996, pp. 131-32.

Lockwood, Lisa, Tommy Dances to the Beat at the Beach, WWD, May 6, 2002, p. 5.

, and Kristen Larson, Tommys Back: Womens Takes Off, WWD, June 27, 2001, p. 1.

Margolis Resigns As Hilfiger Plans to License Womens, Daily News Record, June 2, 1995, p. 2.

Norton, Leslie P., Hot Pants, Barrons, October 17, 1994, pp. 17-18.

Palmieri, Jean E., Bergdorfs Santacroce Joining Hilfiger, Daily News Record, May 30, 1997, p. 2.

Ryan, Thomas J., Tommys Biz Still Playing Happy Tune, Daily News Record, May 25, 1995, pp. 1-2.

, Hilfiger Net Climbs 24.6% in 4th Quarter, Daily News Record, June 4, 1997, p. 1.

Tyrnauer, Matthew, Its Tommys World, Vanity Fair, February 1996, pp. 108-13, 150-51.

A. Woodward

updated by Christina M. Stansell

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Tommy Hilfiger Corporation

Tommy Hilfiger Corporation

6/F, Precious Industrial Centre
18 Cheung Yue Street
Cheung Sha Wan
Kowloon
Hong Kong
(852) 2745-7798

Public Company
Incorporated: 1992
Employees: 794
Sales: $661.7 million (1997)
Stock Exchanges: New York
SICs: 2321 Mens and Boys Shirts; 2325 Mens and Boys Separate Trousers and Slacks; 2329 Mens and Boys Clothing, Not Elsewhere Classified; 2339 Womens Misses/Juniors Outerwear, Not Elsewhere Classified; 5136 Apparel, Mens Wholesale; 5699 Sport wear, Retail; 6794 Patent Owners and Lessors

Tommy Hilfiger Corporation primarily markets mens and boys clothing designed by Tommy Hilfiger. Hilfiger sells a complete line of clothing from socks to shirts, swimwear, jackets, pants, belts, wallets and ties, as well as sleepwear, golf clothes, eyewear, shoes, and fragrances. The company also markets womens clothing, primarily sportswear. Some of these lines are produced under licensing agreements with other companies, who produce the items using Hilfiger designs. The corporation operates over a thousand shops inside established department store chains such as Bloomingdales, Macys, Saks, Nieman-Marcus, Marshall Fields, Dillard Department Stores, May Department Stores, and Federated Department Stores. The company also operates several dozen freestanding Tommy Hilfiger stores, including huge flagship stores under construction in Beverly Hills and on New Bond Street, London. Though most of its market is in the United States, the company also markets its clothing in Japan, Europe, and in South and Central America.

Origins

Though the company was not incorporated until 1992, its history properly begins with the fortunes of its namesake, Thomas Jacob (Tommy) Hilfiger. Born in Elmira, New York, in 1951, Hilfiger started his first clothing business while still in high school. He and two friends invested $300 in used blue jeans and sold them out of an Elmira basement. Hilfiger never attended college, but built up the blue jean business into a chain of seven upstate New York stores called Peoples Place. Peoples Place sold jeans, bell bottom pants, and other clothing, as well as candles, incense, and posters. The stores were successful enough to afford Hilfiger a Porsche, but they were poorly managed. In 1977, Peoples Place was forced to declare bankruptcy. Hilfiger moved to Manhattan and tried to find work as a clothing designer. Though he had no formal training, he had designed and sold vests and sweaters for Peoples Place. He worked freelance, and then started a sportswear company that went out of business after only one year. He eventually found work designing jeans for Jordache.

In 1984, Hilfiger was contacted by Mohan Murjani, an Indian textile magnate. Murjani owned the license to Gloria Vanderbilt jeans, and had helped spark the craze for designer jeans in the 1970s. Murjani had an idea to update the popular preppy look associated with designer Ralph Lauren, and give it a younger and more mass appeal. He chose Hilfiger to design the line for his firm, Murjani International. But in the beginning, marketing was much more important than the actual clothes.

First Marketing Campaign, 1985

The line of Tommy Hilfiger clothing debuted in the fall of 1985 with an ad campaign that featured no clothes, but declared that Hilfiger was a designer on par with Ralph Lauren, Perry Ellis, and Calvin Klein. The ads did little more than insert Hungers name in the pantheon. Yet this was somehow effective. The brashness of the strategy attracted attention in the fashion industry, and caused comment by Johnny Carson and other notables. The first ads were centered around New York City, using print and outdoor media. By 1987, the Hilfiger line was attracting more national attention with advertisements in People, USA Today, Newsweek, GQ, Sports Illustrated, and others. The entire advertising budget for Hilfiger clothing was only $1.4 million, and ads appeared infrequently. But they made a splash with double-page spreads, and because they featured words, logos, or Hungers face, and no images of clothes or models, they stood out from other fashion advertisements. George Lois, who helped create the ads for the firm Lois, Pitts, Gershon, Pon/GGK, claimed in a March 1988 Marketing and Media Decisions article that he could not make Hungers clothes look any better than anyone elses, and therefore the ads sold an idea and not the particular fashion. According to one survey, after only two years of his ads Hilfiger had succeeded in convincing 68 percent of sampled New Yorkers to name him as one of the top four or five important designers. Sales also attested to the brilliance of the marketing strategy. In 1986, Hilfiger brand clothing was available in 60 department stores and 25 specialty shops, and brought in $32 million in retail sales. A year later, retail sales had more than doubled, to $70 million.

Though clever advertising turned Hilfiger from an unknown into a top-selling designer, it was not only the mystique of the ads that accomplished this. The clothing was for the most part casualkhaki pants and a big polo shirt being the quintessential Hilfiger outfit. There was a little more flippancy in the cut and colors than the more staid Ralph Lauren style that Murjani had set out to imitate, and the clothes retailed for a bit less than similar designer togs. Hilfiger clothes fit the trend towards more casual work clothesmany offices in the 1980s were just instituting casual Fridaysso this particular niche was expanding. Hilfiger clothes became staples of college men, and others in the 20- to 35-year-old age group. The clothes were well-made, well-priced, similar to an existing fashion but with enough difference to stand out, and the offbeat ad campaign ignited a craze for them.

Expanding the Label, Late 1980s

By the late 1980s, Murjani International was troubled financially. The company also licensed Gloria Vanderbilt and the Coca-Cola brand of clothing. The company seemed unable to focus adequately on the Hilfiger brand, which was growing enormously. In 1988, Tommy Hilfiger, Mohan Murjani, and two others formed a new company, called Tommy Hilfiger Co. Inc., buying out Murjani International. The deal was complicated, and it took the new company almost a year to finally purchase back from Murjani the rights to the Tommy Hilfiger name. In the meantime, the company found a new financial backer in Hong Kong businessman Silas Chou. Chous firm, Novel Enterprises, was one of the largest sweater manufacturers in Asia, and the company was willing to invest money in Tommy Hilfiger Company to allow it to expand. The new principles were Chou, Hilfiger, and two former Ralph Lauren executives, Lawrence Stroll and Joel Horowitz. Mohan Murjani was out. With Chous extensive contacts in the Asian garment industry, the new company not only designed but manufactured Hilfiger clothing, using Asian factories that produced low-cost, high-quality goods.

Chou was eager to push the Hilfiger line to greater availability. Sales for the new company were only $25 million its first year, so they had fallen off quite a bit from the Murjani days. Yet Chou insisted on renting a luxurious midtown Manhattan office space as New York headquarters, surmising that things would quickly get better. And they did. In the fall of 1992, the company made an initial public offering on the New York Stock Exchange at $15 a share. Within a few months, the stock was selling at $25. Revenue for 1992 was $107 million, an astonishing increase that justified Chous hopes. Hilfiger became a Wall Street darling, with steadily increasing earnings. In November 1993, a secondary stock offering brought in $70 million. The company used this cash to expand its in-store shops and to develop new outlet stores, which would sell past-season Hilfiger garments at reduced prices.

Mid-90s Successes

Hilfigers sales went up and up, from $107 million in 1992, to $138 million in 1993, to $227 million in 1994. There were close to 500 Tommy Hilfiger sections within department stores by the mid-1990s. About half the companys revenues came from sales at three big department store chains: Dillards, Federated, and May. Another 15 percent of sales came from the discount chains T.J. Maxx and Marshalls, which sold the outdated stock at lower prices. Hilfiger began opening its own freestanding shops as well, debuting in Stamford, Connecticut, and Columbus, Ohio.

By 1994, it seemed everyone knew who Hilfiger was. President Clinton wore Hilfiger designs, as did the Prince of Wales, rock stars Michael Jackson, Elton John, and Snoop Doggy Dogg. But perhaps the most fanatic fans of Hilfiger designs were urban youths who gave the preppy look a new twist. Hip ghetto kids began taking the essentially suburban Hilfiger clothes and wearing them in extra large sizes, in eclectic mixes with sports gear. Drooping pants from which Hilfiger logo underwear peeked out was one peculiar fashion. The designer noticed the street trend and responded by making extra extra extra large sizes (labelled giant), brighter colors, and bigger and bolder logos. It was apparently what the people wanted, and sales soared. Hilfiger had achieved a remarkable level of mass appeal, with everyone from bike messengers to CEOs dressed in his designs.

Company Perspectives:

We believe... The spirit of youth is our greatest inspiration. Resourcefulness if the key to value and excellence. In making quality a priority of our lives and products. By respecting one another we can reach all cultures and communities. By being bold in our vision we continually expand our boundaries.

Sales and earnings kept going up dramatically. The company used its profits to expand in various ways. Between 1994 and 1995 Hilfiger Corporation added over 200 in-store mens shops. The company had introduced boys clothes in sizes 8 to 20, and when this line was successful, introduced a line for boys in sizes 4 to 7 in spring 1995. The company had close to 500 in-store boys shops, and planned to add more. Hilfiger licensed its name to Cypress Apparel to make robes and sleepwear, and to other manufacturers licensed scarves, handkerchiefs, umbrellas, and a line of golfing clothes. Hilfiger had a presence in Japan, with 36 shops inside Japanese department stores by 1995. And in that year, the company launched 12 in-store shops across Central and South America. A new fragrance line, produced through a licensing agreement with Estée Lauder, also sold well.

Hilfiger slowly built more freestanding stores, with six full-price and 16 discount outlet stores open by 1995. The company had to move cautiously on its own stores, in order not to appear to compete with the Hilfiger shops operated by its best customers, the large department chains.

Plans to launch a line of womens clothing started and stopped. There had been an unsuccessful attempt to make womens wear when Hilfiger designs were backed by Murjani International. The designer acknowledged that he had taken on too much too soon, and womens wear was dropped. But it was a logical extension of the brands popularity, and potentially enormously profitable. In March 1994, Tommy Hilfiger Corporation hired Jay Margolis as its new president and vice-chairman, with the specific task that he develop a womens wear line. But little over a year later, the company announced that it would not develop the womens line, and Margolis resigned. The company declared that bringing out its own womens wear would be prohibitively expensive, and the new plan was to find a competent licensee. The company eventually licensed womens wear to Pepe Jeans International. Hilfiger chairman Silas Chou owned the Pepe Jeans brand, and the company already produced a mens jeans line for Hilfiger. The womens line came out in the summer of 1996 at more than 400 major department store shops. Like Hilfiger menswear, the womens line was mostly sportswear, and aimed for the same casual wear-to-work niche. The company also put out a womens perfume, Tommy Girl, through a licensing agreement with Estée Lauder. In other expansions, the line of boyswear was extended down into toddler and infant clothes.

Sales for 1996 were close to $500 million, and the companys earnings increased over 60 percent. Hilfiger stocks had at times been the highest traded apparel stocks on Wall Street, and investors seemed to love the companys strong growth. The danger to investors, of course, was that the enormously popular Hilfiger brand would suddenly turn stale. Fashion stocks tended to be unpredictable, because apparels success was mostly dependent on a fickle public. But Tommy Hilfiger Corporation still seemed capable of continued expansion. Profit margins were widening, something investors looked at as an indicator of soundness. And the trend toward casual work clothing that Hilfiger had first taken advantage of was still running. One industry survey indicated that over 20 percent of offices were casual every daynot just Friday. Workers were spending money on nice casual clothes such as Hilfiger designs, and so there did not seem to be a looming end to the clothings popularity. And though Hilfiger Corporation had brought out its womens line, its staple was still menswear, traditionally more stable than womens apparel. Hilfiger designs were also priced well. General consumers typically spent less than $50 on individual items of clothing, and most Hilfiger apparel was in that range. Nevertheless, Hilfiger was perceived as high quality. The company had not watered down its appeal by making the brand available at lower-end chains such as Penneys and Sears. And by 1997 the company was just beginning to expand into European markets. A huge flagship store was under construction in London, and presumably there was much market potential overseas.

Tommy Hilfiger Corporation had taken a virtually unknown designer and declared him a dean of menswear on par with industry leaders Calvin Klein, Ralph Lauren, and Perry Ellis. Remarkably, consumers bought the idea, and bought the clothing. A dozen years after the companys brash inaugural ads, the clothing was selling more strongly than ever, not only in the United States but in Japan, Europe, and Central and South America. The combination of guileful advertising, shrewd management, and a truly appealing and useful product brought the company to this global level. The staying power of a fashion product is always doubtful, but this only makes Hilfigers present level of success more extraordinary.

Principal Subsidiaries

Tommy Hilfiger U.S.A. Inc.; Tommy Hilfiger Licensing, Inc. (U.S.A.); Tommy Hilfiger Retail, Inc. (U.S.A.); Tommy Hilfiger (Eastern Hemisphere) Ltd. (Hong Kong); Tommy Hilfiger (HK) Ltd. (Hong Kong); Tommy Hilfiger Nippon Co., Ltd. (Japan; 90%); Tommy Hilfiger Japan Co., Ltd. (49%).

Further Reading

Alson, Amy, 7th Avenues Bad Boy, Marketing & Media Decisions, March 1988, pp. 79-82.

Bradford, Stacey L., Tommy Who? Financial World, March 18, 1997, pp. 41-44.

Brady, Jennifer L., Hilfiger Head Sees Huge Growth for Womens Line, Womens Wear Daily, October 3, 1996, p. 5.

Conant, Jennet, A Flashy Upstart, Newsweek, October 6,1986, p. 68.

Cropper, Carol, Designing Earnings, Forbes, February 1, 1993, p. 105.

Doebele, Justin, A Brand Is Born, Forbes, February 26, 1996, pp. 65-66.

Gibbons, William, Confirm New Firm to Make, Market Tommy Hilfiger Apparel, Daily News Record, November 29, 1988, p. 7.

Green, Michelle, Johnson, Kristina, and Little, Benilda, With Brash Advertising and a $20 Million Boost, Tommy Hilfiger Takes on Seventh Avenue Titans, People, July 7, 1986, pp. 89-90.

Hochswender, Woody, Prep Urban, Esquire, March 1996, pp. 131-32.

Margolis Resigns As Hilfiger Plans to License Womens, Daily News Record, June 2, 1995, p. 2.

Norton, Leslie P., Hot Pants, Barrons, October 17, 1994, pp. 17-18.

Palmieri, Jean E., Bergdorfs Santacroce Joining Hilfiger, Daily News Record, May 30, 1997, p. 2.

Ryan, Thomas J., Tommys Biz Still Playing Happy Tune, Daily News Record, May 25, 1995, pp. 1-2.

_____, Hilfiger Net Climbs 24.6% in 4th Quarter, Daily News Record, June 4, 1997, p. 1.

Tyrnauer, Matthew, Its Tommys World, Vanity Fair, February 1996, pp. 108-13, 150-51.

A. Woodward

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Tommy Hilfiger Corporation

Tommy Hilfiger Corporation

founded: 1992



Contact Information:

headquarters: 6/f precious industrial centre
18 cheung yue st., cheung sha wan
kowloon, hong kong phone: (852)2745-7798

OVERVIEW

The Tommy Hilfiger Corporation designs, distributes, and markets clothing and accessories under the Tommy Hilfiger trademark. The company's key products include woven shirts, knits, pants, outerwear, athletic wear, and denim, most prominently displaying the Tommy Hilfiger logo. Primary industry segments include men's sportswear and children's clothing. Through various licensing agreements, the Tommy Hilfiger collection has expanded to include a wider range of apparel, accessories, footwear, and fragrances for men, women, and children. Tommy Hilfiger apparel is sold in more than 2,000 department stores and specialty stores such as Lord & Taylor, Macy's, and Dayton Hudson. The Tommy Hilfiger Corp. also operates retail outlet stores throughout the United States.

Since Tommy Hilfiger and Silas Chou formed Tommy Hilfiger, Inc. in 1989, Chou has pushed for expansion. Developing businesses in wholesale, retail, and licensing across the globe, Hilfiger executives still see this goal as one of the company's central business strategies. Today, Tommy Hilfiger products are available in stores throughout the United States, Canada, Mexico, Japan, Central and South America, Europe, and the Far East (as of spring 1998). In his book, All American, Hilfiger explains the success of his product lines in foreign markets by saying, "When I started to travel the world, I saw the fruits of American labor everywhere I went, the products and logos that are the trademarks of our industry and our culture. In the most exotic places in the world, you will see people wearing Levi's and drinking Coca-Cola, obsessing over fifties cars, and sporting cowboy shirts and boots, or wearing the rugged clothes we made for the great outdoors. No matter how different the customs, the world is tuned in to the signature emblems of the American lifestyle."




COMPANY FINANCES

Since the Tommy Hilfiger Corp. went public in 1992, revenue and profits have grown steadily. First year revenues in 1993 were $138 million, with $57 million in gross profits. In 1994, these figures rose to $227 million in revenues, and $100 million in gross profits. Over the next several years, revenues kept climbing, to $321 million in 1995, $478.1 million in 1996, and reaching $661.7 million in 1997. Gross profits followed the same trend, climbing to $146.4 million in 1995, $219.7 million in 1996, and $316.8 million by 1997.

Net income for the Tommy Hilfiger Corp. has doubled over the past three years, rising from $40.7 million in 1995, to $61.5 million in 1996, and reaching $86.4 million in 1997. Net income for the third quarter alone of fiscal year 1998 (10/1/97-12/31/97) totaled $36.4 million, up 33 percent from the third quarter of 1997. For the nine months ending 12/31/97, revenues rose 31 percent to $644.4 million, while the company's net income rose 34 percent to $85.8 million. These results were reported to reflect a strong rise in sales for the childrenswear market segment, the opening of 10 new retail outlets, and the success of in-store shop expansions.

The company's earnings per share have kept pace with revenues and income, rising from $.55 in 1993 to $.77 in 1994, $1.12 in 1995, $1.65 in 1996, up to $2.28 in 1997. The Tommy Hilfiger Corp. opened in 1992 with a stock price of $15.00 per share. Over the 52-week period from March 20, 1997 to March 20, 1998, Tommy Hilfiger stock ranged from a low of $33.00 to a high of $61.50. The Tommy Hilfiger Corporation's price-earnings ratio is 21.45.

Some of Tommy Hilfiger's newest market segments were expected to generate significant revenue in 1998-99. The women's jeans collection was expected to earn $200 million in 1998 net sales. Together, the women's jeans and Canadian business markets were expected to earn combined net sales of $430 million in 1998 (vs. $229 million in 1997, an 88 percent increase). First-year wholesale projections for the company's new junior jean-swear collection (Tommy Jeans) were $100 million. An initial roll-out was planned for 1998 in 500-600 department stores.



ANALYSTS' OPINIONS

Due to strong prospects for international expansion and additional licensing, financial analysts projected a healthy 20 percent-plus growth rate for the Tommy Hilfiger Corp. over the next five years, double that of the apparel industry as a whole. The Company has an excellent track record for meeting or beating analyst forecasts, and was on track to do so in 1998. However, analysts were somewhat divided on the Tommy Hilfiger Corporation's potential for future earnings growth and on how to appropriately evaluate stocks based on projected earnings. Initially assigned a more conservative "Market Perform" rating by J.P. Morgan in September of 1997, J.P. Morgan and DLJ upgraded Tommy Hilfiger stock to a "Buy" rating in February of 1998, where it has since remained, actually meriting a "Strong Buy" from several other analysts. This upgrade can be largely attributed to the design house's third quarter 1998 report of 33-percent growth in earnings per share and 31-percent growth in revenue, as well as the company's announcement of its acquisition of two licensees, Pepe Jeans and Tommy Hilfiger Canada. The day the announcement was made, Tommy Hilfiger stock rose 7 11/16 points. Competitor Polo Ralph Lauren realized a $1 7/8 gain the same day, some believe also a result of the Tommy Hilfiger Corporation's announcement.

FAST FACTS: About Tommy Hilfiger Corporation


Ownership: The Tommy Hilfiger Corp. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: TOM

Officers: Silas K. F. Chou, Chmn., 51, 1997 base salary $750,000 plus $325,000 bonus; Joel J. Horowitz, Pres. & CEO, 48, 1997 base salary $473,000 plus $7,174,000 bonus; Thomas J. Hilfiger, Honorary Chmn. & Principal Designer, 47, 1997 base salary $8,498,223 plus $4.5 million bonus ($3.5 million deferred); Lawrence S. Stroll, Director & CEO Tommy Hilfiger (HK) Ltd., 38, 1997 base salary $625,000 plus $325,000 bonus

Employees: 1,570

Principal Subsidiary Companies: Majority-owned subsidiaries of the Tommy Hilfiger Corp. include: Tommy Hilfiger U.S.A., Inc.; Tommy Hilfiger Licensing, Inc.; Tommy Hilfiger Retail, Inc.; Tommy Hilfiger Flagship Stores, Inc.; Tommy Hilfiger (Eastern Hemisphere) Ltd.; Tommy Hilfiger (HK) Ltd.; and Tommy Hilfiger Japan Co., Ltd.

Chief Competitors: The Tommy Hilfiger Corp. designs and markets clothing, primarily casual clothing and sportswear. Its chief competitors include: Benneton; Calvin Klein; Donna Karan; Guess; Levi's; Liz Clai-borne; Nautica; Perry Ellis; Polo/Ralph Lauren; and The Gap.




HISTORY

Tommy Hilfiger was raised in Elmira, New York. At age 16 he became interested in clothing and actually started his first clothing business during his senior year in high school, selling bell bottoms and candles in a small shop he opened in Elmira. He eventually began designing his own merchandise, and expanded his business to include 10 shops across upstate New York. Unfortunately, his first business venture ended by filing for bankruptcy by the time he was 25. Afterwards, he and his wife, Susie, moved to New York City to look for design work. By 1985, he was considering offers to work for Perry Ellis and Calvin Klein, but declined both. It was then that Mohan Murjani offered him his own company. It was also at this time that Hilfiger, having been through stages where he designed fashionable 70's and 80's trendy clothing, returned to his preppy roots. As he states in All American, "Picturing a more New England, outdoorsy, and classic campus look that I knew would last, I launched Tommy Hilfiger."

In 1989, Hilfiger left Murjani International and began searching for money to expand his own private label. In the process he met Silas Chou, who had the financial resources, but needed a brand name to keep building up his business in Hong Kong. The two joined up with former Ralph Lauren executives, Lawrence Stroll and Joel Horowitz, and formed Tommy Hilfiger, Inc. The company not only owns the designs, but also does its own manufacturing. This arrangement was different than that followed by most designers, who license their name and design to a separate manufacturer. By having one company responsible for both design and manufacturing, Hilfiger and Chou eliminated the friction that sometimes arises between designers and manufacturers, each trying to earn the most from licensing deals.

Capitalizing on Polo's success with the preppy look, Hilfiger designed casual men's and boys' sportswear in brighter colors with a looser fit. And because the company manufactures its own designs, he was also able to produce quality merchandise for less than Polo charged and appeal to a wider market.

Chou has always pushed the Tommy Hilfiger Corp. toward expansion. While Hilfiger admits he preferred to start slow, Stroll and Chou insisted they hit the ground running, and haven't stopped. Tommy Hilfiger, Inc. went public in 1992. In 1995, they licensed Pepe Jeans USA, and in 1996 began distributing women's clothing. In late 1997, the Tommy Hilfiger Corp. opened its first flagship store on Rodeo Drive in Beverly Hills, and a second store in London in early 1998. One more store in London was planned within the next year. The company also has sales operations in Atlanta, Chicago, Dallas, Los Angeles, New York, Philadelphia, and San Francisco.

In 1998, the Tommy Hilfiger Corp. announced that they were buying Pepe Jeans USA and Tommy Hilfiger Canada (its Canadian distributor) for $1.15 billion. This acquisition would return partial ownership of the Tommy Hilfiger Corp. to its founding partners—Hilfiger, Chou, president and CEO Joel Horowitz, and Tommy Hilfiger (HK) Limited CEO Lawrence Stroll. All four partners sold their company shares in 1996 to finance licensing and acquisition deals and further company expansion.




STRATEGY


Corporate Growth

In a February 1998 press release, chairman Silas Chou explained, "Over the last five years, our strategy was to develop our core men's U.S. wholesale and retail businesses and, through select licensing arrangements, to position Tommy Hilfiger as a global lifestyle brand. During the same period, Pepe Jeans and Tommy Hilfiger Canada have taken the women's jeans and Canadian businesses through what we believe was their risky and costly start-up phases and have positioned them for significant revenue and profit growth. These timely and complementary additions to our more established men's business are designed to deliver enhanced shareholder value by providing great growth momentum to carry us into the next millenium."

The Tommy Hilfiger Corporation's primary growth strategy more recently has been expansion of its in-store shop program. As part of this program, retailers set aside floor space specifically for the sale of the Tommy Hilfiger collection, and highlight it with distinctive fixtures and creative displays of merchandise. The company planned to continue this strategy by increasing the number of shops in the United States and internationally. In fiscal year 1997 alone, they added approximately 180 in-store shops, and planned to continue with expansion of new and existing shops.

CHRONOLOGY: Key Dates for Tommy Hilfiger Corporation


1989:

Tommy Hilfiger and Silas Chou form Tommy Hilfiger, Inc.

1992:

Tommy Hilfiger stock goes public

1996:

Begins distributing women's clothing

1997:

Opens first flagship store on Rodeo Drive in Beverly Hills

1998:

Opens London store




Marketing

According to a profile on Tommy Hilfiger in Chain Store Age Executive with Shopping Center Age, "What distinguishes Tommy Hilfiger from the pack is his extreme hands-on approach toward driving sales through retail stores." The designer hosts fashion shows and autograph sessions personally in department stores, and he holds live-via-satellite briefings for sales associates at Dillard's across the country, including interactive question and answer sessions. Additionally, the Tommy Hilfiger Corp. employs approximately 120 coordinators throughout the United States to educate retailers' sales staff about current Tommy Hilfiger products, coordinate in-store displays, and solicit direct consumer feedback for the company. They also conduct training programs for Tommy Hilfiger sales specialists, designed to educate them on the company's image and merchandising standards and to encourage the development and servicing of clientele. Training programs also cover customer assistance and advice, including helping customers select merchandise and putting together outfits.

Decisions on what merchandise to place in the stores are made based on defined merchandising strategies. Product lines fall into one of three categories: core, core-plus, and fashion. The core collection consists of Tommy Hilfiger basic products (i.e., pleated chino pants and shorts, knit polo shirts, oxfords, T-shirts, and jackets) in classic solid colors, that are seasonless. They are made available throughout the year. The core-plus collection includes a wide range of of seasonal "basics," available in a greater array of colors, fabrics, and patterns. There are four different seasonal lines. Fashion pieces are the most frequently updated pieces of product line. They focus on a seasonal theme selected by Hilfiger, who offers products under three themes per season, creating a continual flow of new merchandise into the marketplace.

The Tommy Hilfiger Corp. also believes that licensing agreements, in general, provide more effective manufacturing, distribution, and marketing of products than they could do in-house. They are always pursuing new opportunities in areas the company sees as complementary to existing product lines.


Advertising

Not one to shy away from publicity, Tommy Hilfiger based an entire advertising campaign for his jean-swear on celebrity children such as Kate Hudson (Goldie Hawn's daughter), Mark Ronson (Mick Jagger's son), and Kentaro Seagal (Stephen Seagal's son). In his early days as a designer with little name recognition, Tommy Hilfiger used this strategy to garner publicity for his new company by placing celebrity children in fashion shows and taking them on promotional tours. Not only was it great publicity to have celebrity children on the runway, but hopefully their parents turned up in the audience. Other companies have since followed Hilfiger's lead, signing up models such as Ivanka Trump and Kimberly Stewart, daughter of Rod Stewart and Alana Hamiltion. According to Andy Hilfiger, who designed the campaign, "It's the perfect blending of fashion and Hollywood." And the company takes no financial risk.

The Tommy Hilfiger corporation uses this type of strategy to "cultivate image," which chairman Silas Chou calls a crucial component to maintaining demand for a worldwide lifestyle designer brand. Advertising compaigns for the year-old women's sportswear collection were aimed at what he terms the "VHI generation." But the new junior jeanswear collection (Tommy Jeans) for teens, is targeted more toward the "MTV" generation, customers 14-15 years old. Hilfiger calls the overall style "freestyle," more young and trendy than his classic preppy look. An intensive print and TV campaign was planned, aimed at the Seventeen and Teen People audience.



INFLUENCES

The Tommy Hilfiger Corporation's constant desire for expansion has propelled them toward the introduction of several entire new product lines. When the company first opened, the men's collection was responsible for all of the company's revenues. Due to the success of the company's expansion, it now accounts for only 60 percent of the Tommy Hilfiger Corporation's revenues.

Tommy Hilfiger's first women's fragrance "tommy girl," was created following the strong success of his men's fragrance, "Tommy." Tommy became the number one selling men's fragrance in the United States one year after it was introduced. Buoyed by the success of these fragrances, a new line of toiletries and makeup was expected, as well as a third fragrance. It has also spurred the company to introduce in-store boutiques in some department stores. The shops, which will be tested out by Aramis, licensee of the Hilfiger fragrance line, will sell "Tommy, Tommy Girl, and the upcoming Hilfiger Athletics, and will exclusively house the new toiletries line."

The company's women's casualwear, licensed to the Pepe Jeans London Corp., has also earned success, but only after some modification. When the company launched the Tommy by Tommy Hilfiger collection in fall of 1996, they opted not to use his patent "casual" look and offered tailored tweed jackets and wools. However, his target market continued to buy his trademark casual basics-demin, chinos, and logo pieces. Hilfiger changed his design strategy, developed women's clothing more in line with his casual look, and came away with $125 million in wholesale volume his first year. He has since added a few more dressy items, and launched a better, higher-priced sportswear collection aimed at the 25-plus women's market.



CURRENT TRENDS

The Tommy Hilfiger Corp. continues to seek new opportunities to grow its men's wholesale business. For example, they expanded athletic sportswear into its own "performance athleticwear" business. They also expanded the children's business to include infant sizes for boys and girls and toddler sizes for boys in fall 1997.

Retail remains another targeted growth area. The company added 11 new outlet stores in fiscal year 1997 bringing the total number up to 47. The company uses outlet stores to take advantage of those consumers seeking added value. And the retail outlets also provide them with an additional distribution channel. By the end of the third quarter of fiscal year 1998, they opened 10 more. The Tommy Hilfiger Corp. also opened its flagship store on Rodeo Drive in Beverly Hills in time for the holiday 1997 season, opened one store in London in fiscal year 1998, and expected to open another during fiscal year 1999. These specialty retail stores were designed for those customers who prefer the specialty store environment, and showcase Tommy Hilfiger sportswear and certain licensed product lines.




PRODUCTS

The Tommy Hilfiger Corp. planned to continue expanding product offerings, both in-house, through licensing, and by expanding distribution channels. In 1997, the company signed agreements with Lantis Eyewear Corp. for Tommy Hilfiger sunglasses, Liberty Optical for prescription eyewear, Tommy Hilfiger footwear with Stride Rite, and launched its new women's fragrance "tommy girl" through existing licensing agreements with Aramis. In 1998 they announced plans to enter the home furnishings market, including linens, bedding, and bath products, with Revman Industries. And in March of 1998, the Tommy Hilfiger Corp. announced a new licensing arrangement with the Cypress Apparel Group to produce and manufacture a collection of women's robes and sleepwear in time for the 1998 holiday season.



CORPORATE CITIZENSHIP

The Tommy Hilfiger Corp. makes efforts to use its standing as a way to generate funding for charitable causes. The Tommy Hilfiger Corporate Foundation helps various charities meet financial and education goals. In 1997, for the third time, the Company's boyswear national advertising campaign asked for support for Fresh Air Fund, a non-profit agency that sponsors summer vacations for more than 10,000 disadvantaged New York children annually. They also used the celebration of the flagship Rodeo Drive store opening in November 1997 to showcase a "fashion music show," which was also a benefit for the Race to Erase Multiple Sclerosis.



GLOBAL PRESENCE

One of the Tommy Hilfiger Corporation's primary goals is to build a "global designer brand." Toward that end, they look for leaders in respective markets who share the Tommy Hilfiger vision for worldwide growth when arranging licensing agreements. To date, Tommy Hilfiger products can be found in leading department and specialty stores throughout the United States, Canada, Mexico, Japan, Central America, South American, Europe, and the Far East. Licensees were building up the Tommy Hilfiger brand by adding in-store shops or free-standing stores, and working with U.S. marketing to host events and sponsor national advertising.

As part of the company's global expansion plan, the Tommy Hilfiger Corp. entered into an exclusive retail agreement with KSDP International Ltd. in the Asia-Pacific region to own and operate Tommy Hilfiger stores beginning in spring of 1998. They planned to launch the men's sportswear collection in Hong Kong and Taiwan, and expected great things due to the established success of Hilfiger's fragrance line in Asia.

DRESS FOR SUCCESS?

What do a leading fashion designer and members of the rap community have in common? More than you might imagine. Tommy Hilfiger, an undisputed fashion success story, has benefited immensely from the perhaps unofficial endorsements given to him by rappers such as The Fugees, Snoop Doggy Dogg, and Brooklyn's Biggie Smalls.

In exchange for receiving free wardrobes, rappers began mentioning Hilfiger's name in the rhymes and verses of their songs, spreading the word around about Hilfiger and expanding his fashion empire out into the urban youth market. Then, like a infectious disease, Hilfiger's trademark mix of blue, red, and white designs reached out into suburbia from the inner city, bringing a whole new hip-hop culture along with it. Suburban youth, anxious to embrace this new style, began supporting Hilfiger by purchasing hip-hop style clothing, such as baggy pants and loose rugby shirts sporting the Hilfiger logo. Not only were there great numbers of suburban youth, they tended to be affluent, and therefore, more capable of purchasing designer clothing. By appealing to suburban adolescents' rebellious side, Hilfiger unlocked the door to greater financial opportunities than the previous market.




The company plans to continue using licensing agreements to expand global distribution. They signed with Pepe Jeans London to distribute Tommy Hilfiger men's sportswear at leading European and U.K. department and specialty stores in fall 1997. They opened their first international retail store on Sloane St. in London, and another is scheduled to open in London in time for the 1998 holiday season.

SOURCES OF INFORMATION

Bibliography

brooke, jill. "celebrity genes: advertisers are capitalizing on stardom by proxy." adweek, 19 january 1998.

doebele, justin. "a brand is born." forbes, 26 february 1996.

hilfiger, tommy, and david keeps. all american: a style book. new york: universe publishing, 1997.

larson, soren. "tommy turning it up." wwd, 12 december 1997.

socha, miles. "tommy's teen jeans." wwd, 8 january 1998.

"tommy hilfiger." chain store age executive with shopping center age, september 1997.

"tommy hilfiger corporation." hoover's online, january 1998. available at http://www.hoovers.com.

For an annual report:

telephone: (212)840-8888 or write: investor relations, c/o tommy hilfiger u.s.a. inc., 25 w. 39th st., new york, ny 10018-3805


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. tommy hilfiger's primary sics are:

2321 Men's and Boys' Shirts, Except Work Shirts;

2325 Men's and Boys' Separate Trousers and Slacks;

2329 Men's and Boys' Clothing, NEC;

2331 Women's, Misses', and Juniors' Blouses and Shirts;

2339 Women's, Misses', and Juniors' Outerwear, NEC;

5136 Men's and Boy's Clothing and Furnishings

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Notes:
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  • In addition to the MLA, Chicago, and APA styles, your school, university, publication, or institution may have its own requirements for citations. Therefore, be sure to refer to those guidelines when editing your bibliography or works cited list.