Tommy Hilfiger Corporation Business Information, Profile, and History

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.

History of Tommy Hilfiger Corporation

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 Children's 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 People's Place. People's 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, People's 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 People's 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 Hilfiger's 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 Hilfiger's 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 Hilfiger's clothes "look any better than anyone else's," 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 casual--khaki 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 clothes--many offices in the 1980s were instituting casual Fridays--so 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. Chou's 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 Chou's 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 Chou's 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

Hilfiger's 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 company's revenues came from sales at three big department store chains: Dillard's, 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 CEO's dressed in his designs.

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 men's 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 women's clothing started and stopped. There had been an unsuccessful attempt to make womenswear 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 brand's 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 women's 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 men's jeans line for Hilfiger. The women's line came out in the summer of 1996 at more than 400 major department store shops. Like Hilfiger menswear, the women's line was mostly sportswear and aimed for the same casual wear-to-work niche. The company also put out a women's 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 company's 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 company's 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 apparel's 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 clothing's popularity. Also, though Hilfiger Corporation had brought out its women's line, its staple was still menswear, traditionally more stable than women's 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 Penney's 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 company's 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, Hilfiger's 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 women's handbags.

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 company's problems, commenting that "Tommy rested on its red, white, and blue laurels too long. New trendier brands (think Fubu) dominate urban fashion, while Tommy's clothes fill bargain bins at Bloomingdale's and Macy's." The article went on to state that "Hilfiger tried a host of makeover strategies that were belated and misguided." These strategies included a lackluster women's 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 women's 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, Bloomingdale's--with the exception of the 59th Street location in New York--pulled the Tommy menswear line from its brand lineup in 2001.

During 2001, a women's 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 company's efforts appeared to pay off, and by June of that year sales in both women's and junior's 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 Hilfiger's 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 Island's 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); Tomcan 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.

Chronology

• Key Dates:
• 1977: Tommy Hilfiger's first company, People's 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 women's 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.