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Metoric Rise of Tommy Hilfiger

Metoric Rise of Tommy Hilfiger "The Four Great American Designers for Men Are: R---- L-----, P---- E----, C----- K----, T---- H-------". When this Wheel of Fortune-style advertisement was unveiled in 1985, the public easily identified the first three designers as Ralph Lauren, Perry Ellis, and Calvin Klein, but who was this fourth designer? The fourth designer, to whom the ad belonged to, was Tommy Hilfiger. At that time, Tommy Hilfiger and his recently begun company specializing in men's fashions were unknown. However, in less that a decade since that first advertisement appeared, Tommy Hilfiger has become a hugely successful company at the forefront of the fashion industry. As Jack Hyde, a Fashion Institute of Technology professor, has stated, "It's Hilfiger, Hilfiger, Hilfiger." Tommy Hilfiger, 48, founder, designer, and honorary chairman of the Hong Kong-based company that bears his name, was born and raised in the small town of Elmira, New York. He was one of nine children. Even at a young age, his fashion and artistic talents were shown through his dress. "He's always wearing a shirt or a pair of pants that was a little different than what everyone else was wearing" a friend of his remarked. In 1969, Hilfiger and two friends opened People's Place, a store specializing in trendy fashions and other items. The store grew and expanded with People's Places opening in various upstate New York towns such as Ithaca and Corning. Hilfiger, wanting to design clothes rather than purchase them from the manufacturer, began to consider becoming a designer. When his People's Place chain went bankrupt in 1977, Hilfiger moved to New York and worked as a designer, even though he had never attended design school, for various companies until 1984, when Tommy Hilfiger the company was born. Today Tommy Hilfiger labels grace everyone from President Bill Clinton to rapper Snoop Doggy Dogg and that wide range of clientele accounts for the company selling $756.9 million dollars' worth of merchandise each year. Last year, Tommy Hilfiger Corporation (TOM) was one of the top apparel firms traded on the New York Stock Exchange. In the past 52 weeks, stock in the company has traded as high as $59.125 and as low as $36.25. According to its November 5, 1997 quarterly report, the company's net income increased 34.7% to $49,401,000, or $1.30 per share, during the six months ended September 30,1997 from $36,668,000, or $.97 per share, in the corresponding period of fiscal 1997. It's net revenue increased $95,245,000, or 31.4%, compared to $398,281,000 from $303,036,000 due to volume increases in the company's wholesale menswear (up 16.9%), wholesale boyswear (up 72.6%), retail (up 34.0%), and the royalties and buying agency commissions (up 133.6%) operating divisions. Tommy Hilfiger Corporation's gross profit as a percentage of net revenue increased to 48.1% in the first six months of fiscal 1998 from 47.9% in the first six months of fiscal 1997. The highly competitive apparel industry consists of a large number of firms and has a low market concentration, men's and boy's clothing and women's clothing having a 198 and 61 HHI, respectively. With so many firms competing, one may wonder what Tommy Hilfiger's success in the monopolistic competitive apparel industry can be attributed to. Their success lies partly in the effective ways in which they have differentiated their products from those of other apparel companies such as Ralph Lauren and Calvin Klein through the company's endorsement by the hip-hop community. In the company's early years, the apparel line was associated with "happy preppie people" not "urban grit." However, in the early 1990's, rappers began wearing Hilfiger clothing as status symbols. In March 1994, rapper Snoop Doggy Dogg put the Tommy Hilfiger label in the spotlight by wearing an oversized Hilfiger jersey on Saturday Night Live. The year after his appearance, company sales increased by more than $90 million. Tommy Hilfiger Corporation recognized that the hip-hop community was at the forefront of the fashion world and the company continued to associate itself with this segment of the market even though other companies tried to distance themselves from it as much as possible. Tommy Hilfiger began supplying clothing for other rap performers including Coolio, TLC, and the Fugees; and the company began using models from various ethnic backgrounds in advertisements appearing in pop-culture magazines such as Rolling Stone. Tommy Hilfiger continued to maintain this connection with pop-culture by sponsoring and dressing Sheryl Crow for her summer tour and by organizing a nation wide tour featuring the models appearing in the company's fall ad campaign. Tommy Hilfiger's appeal to the younger generation through its advertising techniques comes at a time in the economy when teen spending continues to rise due to the increase in teenagers and the fact that teens do more of the family shopping. Another reason for the company's success is in its pricing. According to Amy Spindler, chief fashion critic of the Times, "Tommy Hilfiger tapped into something that was needed in the culture, which was a less expensive Ralph Lauren." With Ralph Lauren being Tommy Hilfiger's biggest rival, the price differentiation combined with the popularity of Tommy Hilfiger in both the suburban and hip-hop urban communities has allowed the company to prosper. Tommy Hilfiger has grown from a company solely specializing in men's apparel, to a company specializing in a wide range of products. In September of 1996, a women's line, "tommy by Tommy Hilfiger" was unveiled, selling $125 million in its first year. The company produces both the women's fragrance, Tommy Girl, and the No. 1-selling men's cologne, Tommy, as well as footwear and a line of apparel for boys. Their collaboration in 1997 with Stride Rite Corporation, maker of the Tommy Hilfiger footwear line, has proven beneficial for both companies with Stride Rite's third quarter income nearly tripling last year's. Tommy Hilfiger Corporation continues to expand. In November they opened up a 20,000 square-foot store in Beverly Hills, California, and they expanded their international market by making an exclusive retail agreement for the Asia-Pacific region with a subsidiary formed by KSDP International, Ltd. Tommy Hilfiger also recently struck a deal with talent agency William Morris to develop projects in the music, film, television, publishing and electronic media businesses. As for the future, a Tommy Hilfiger home collection is set to be unveiled in 1998 as well as an upper-end women's line comparable to Ralph Lauren's "Lauren" line. Tommy Hilfiger Corporation's advertising, pricing, continued product development, and expansion has made the company successful. Above all, Tommy Hilfiger Corporation's success in the apparel industry can be attributed to their realization to, as Tommy Hilfiger himself stated, "Give them (the public) what they want, with a twist." Bibliography:

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