In the 1990s, I remember there was one particular fashion brand above all others that my friends coveted. Even owning one item from this brand was enough to give you a certain cachet. This brand was Tommy Hilfiger. Tommy Hilfiger has been through some tough times since then, but has recently had something of a renaissance. Our Inspirational Brand Turnarounds series has been one of our most popular. And it has been a while since we posted this topic, so we thought this would be the perfect opportunity to revisit it once again.
By the mid 1980s Hilfiger had established himself as a rival to Ralph Lauren and Calvin Klein in the production classic East-coast fashion with a relaxed, unbuttoned vibe. This was the era of Michael Douglas’s Wall St. Sales peaked at $2 billion in sales in the year 2000. But what seemed like destiny turned out to be apogée. Hilfiger had got greedy. Drunk on success among the teenagers and in pop culture (Britney Spears wore Hilfiger in her 1999 smash ‘Hit me baby one more time’), Hilfiger chased the short term trend: baggy, formless clothes with brash, oversize logos. Short term trends are a fickle mistress and it wasn’t long before Hilfiger was on the rocks. By 2005, sales globally were a fraction of what they had been at their peak.
Which brings us to neatly to 2006 when Fred Gehring — Daniel Grieder’s predecessor as CEO — came up with the strategy that saved Tommy Hilfiger. The strategy, the cure, was in essence simple. The cure was to undue the damage done by over-expansion and the devaluing of the brand during the late 90s. With the help of the London-based private equity firm — Apax capital — Gehring rung the changes. The fruit of this work was that by the end of 2013, Hilfiger’s worldwide revenue was $3.4 billion. So what were the key elements in this fabulous turnaround?
This story has some similarities with that of Burberry the legendary British brand that revitalized itself after years of poor quality and excess production. As with Burberry a significant part of the solution was getting rid of the weak, tacky, over-produced parts of the business and returning to premium quality and premium prices. In the early 2000s Tommy Hilfiger was manufacturing shirts to be retailed at $69 that would still make money when inevitably marked down to $39. Fred Gehring laid of 40% of the workforce and dismantled the wholesale operation, creating a leaner, meaner company in the process.
Returning to classic
Tommy Hilfiger recognized that the brands own ethic and style had been mortally damaged by it’s chasing of the 1990s baggy and brash hip hop trend. They had to return to the elegance and simplicity that had won them their success in the first place. Part of this was a result of divesting the tackier wholesale side of the business, but it was also a deliberate policy to drag itself back up into higher echelons of the fashion world.
As well as returning its aesthetic to its East-coast preppy roots, Hilfiger re-positioned itself through pricing. With lessons learned through managing the European section of Tommy Hilfiger, Gehring was able to understand the core principles of premium branding and apply it to the whole Tommy Hilfiger business. Since 2006, Tommy Hilfiger has managed to completely revive its desirability and was even bought out by PVH (who own Calvin Klein) in 2009.
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