November 30, 2005 Building Customer Relationships

Amelia Eveland Bill Briskey

FOUNDATIONS OF AN EMPIRE

The story of Tommy Hilfiger Corporation, THC, begins in the 1960s with its

name sake, Thomas J. Hilfiger and a small string of stores called The People’s

Place in upstate New York (site). The stores were short lived and went bankrupt in

1976. After the failed venture in upstate New York, Tommy Hilfiger moved to New

York City and founded Tommy Hilfiger Incorporated with the backing of Mohan

Murjani, the licensee of Gloria Vanderbilt Jeans. Murjani went bankrupt, but with the

help of two partners, Hilfiger was able to buy back his company. Tommy Hilfiger,

Inc. went public one year later.

Company leaders

Thomas J. Hilfiger

Thomas J. Hilfiger was born and raised in Elmira, New York

(Infomat, 2005). He was the second of nine children in an Irish

Catholic family (Infomat, 2005). Having no formal training, Hilfiger

is self-taught (Tommy Hilfiger Press Release, 2003). After the

failure of his first venture, Hilfiger moved with his wife, Susie, to

New York where he was offered jobs with designers like Calvin Klein and Perry Ellis

(Infomat, 2005). Hilfiger turned down all job offers, wanting to go it alone. “He

introduced his first signature collection in 1984” (Tommy Hilfiger Press Release,

2003). It was then that he founded what would become Tommy Hilfiger Corporation.

2

Hilfiger now resides in Greenwich, Connecticut with his four children and ex-wife

(Infomat, 2005).

Hilfiger has received numerous awards by the industry for his fashion design,

which has not escaped his notice. “Early on in his career, Hilfiger ran and ad

campaign which proclaimed that he, along with Perry Ellis, Ralph Lauren, and Calvin

Klein, are the ‘4 Great American Designers for Men’” (Infomat, 2005). Hilfiger has

been honored by the Parsons School of Design, GQ magazine, and VH1 among

others (Tommy Hilfiger Press Release, 2003)

Thomas J. Hilfiger now holds the position of Principle designer for the Tommy

Hilfiger Corporation (Tommy Hilfiger Corporation 2005 Annual Report, 2005). He

has also been Honorary Chairman of the Board since 1994 (Tommy Hilfiger: Investor

Relations, 2005). He was President of Tommy Hilfiger, Inc. from 1982 to 1989

(Tommy Hilfiger: Investor Relations, 2005).

In his current role, Hilfiger acts as the figurehead for the company. In the past

year Hilfiger stared in the CBS reality-television show, The Cut (CBS.com, n.d.). The

show was fashioned in the same manor as Donald Trump’s show The Apprentice.

Young designers competed to win a job designing for the Tommy Hilfiger

Corporation (CBS.com, n.d.). Thomas Hilfiger made also appearances on his

daughter, Ally’s reality-television show for MTV called Rich Girls in 2003 (MTV.com,

n.d.).

David F. Dyer

David F. Dyer joined the company as Chief Executive Officer in

August 2003 (Tommy Hilfiger: Investor Relations, 2005). Prior to

this, Dryer gained extensive experience in the apparel industry.

3

Dryer began his career working 17 years for Federated Department Stores, Inc.,

which owns Macy’s and Bloomingdales (PBS CEO Exchange, n.d.). Dyer worked

several stints at Lands’ End, Inc., eventually serving as President and Chief

Executive Officer. After Lands’ End, Inc.’s acquisition by Sears, Roebuck and & Co.,

Dyer served as Executive Vice President and General Manger of the Customer

Direct business until joining Tommy Hilfiger Corporation (Tommy Hilfiger: Investor

Relations, 2005). Dyer was educated at Vanderbilt University, earning a Bachelor of

Engineering in Computer Science

OPERATING AREAS

THC operates in four reportable segments:

The U.S. and international wholesale segments both consist of men’s and

women’s active wear, junior and children’s wear that are designed under

Tommy Hilfiger trademarks.

The retail segment consists of 200 outlets and specialty stores in the U.S.,

Canada, and Europe which offer clothing designed and sourced under

Tommy Hilfiger trademarks.

Licensee segment includes operations related to the licensing of Tommy

Hilfiger trademarks for specified products in specific geographic areas. THC

licenses apparel, accessories, footwear, fragrances, and home products.   

BRANDS

Recent changes in consumer behavior have shifted from prescriptive to self-

creative styles, and Tommy designers have not responded well (New York

4

Magazine, 2000). In the segments where the company operates, apparel with logos

has fallen out of favor. Consumers have moved away from this structured approach

toward wanting more freedom in what they wear. They do not desire to be

connected as strongly to a brand label. As Belk describes, consumers view their

possessions as an extension of self (Belk, R.W., 1988). The move toward self-

creative styles may reflect that consumers are shying from brand identification and

wanting to exude a style that is unique and reflects their own personality, rather than

an image created by a brand.

Since 2000, THC lost its brand identity focus; collections were not targeted at

specific segments and they were not designing for the newest urban lifestyle trends.

For example, they targeted teenagers but the styles turned out to be attractive to

“parent’s brand,” being the clothes that are bought for the kids by parents.

In attempt to rescue the brand appeal, its “Spirited All American style”, THC

made some drastic brand changes:

Clarify brand structure by targeting each brand to a specific demographic

area.

Avoid being logo-centric.

Complement brand structure by adding a new upscale brand through the

acquisition of the Karl Lagerfeld brand.

Tommy Hilfiger Brand

The Tommy Hilfiger Brand is divided into three collections: H Hilfiger, Tommy

Hilfiger, and Tommy. Each collection contains several lines. The H Hilfiger and

Tommy Hilfiger collections overlap in their target markets. The Tommy collection is

5

targeted toward a younger market segment. The Tommy Hilfiger brand is divided

into the following collections:

H Hilfiger

The men’s and women’s lines of spring 2004 marked the launch of

the H Hilfiger brand (“Annual Report,” 2005). The new line is in

response to consumer seeking a higher level of sophistication in their

style. The market is defined as “upper end apparel” and offers a dressier look that

can be worn to the office (“Annual Report,” 2004). The company made a $10 million

investment in marketing for the brand, including an advertising campaign that

features rock star David Bowie and his supermodel wife Iman (“Annual Report,”

2004).

The H Hilfiger collection was originally launched exclusively in 120 Federated

Department Stores, but was pulled at the end of summer 2005 (Greenberg, J.,

2005). “In reviewing our brand strategy, it became evident that the H Hilfiger line

was not appropriately positioned within the department store channel,” said Dyer and

Hilfiger in THC’s Annual Report (2005). The company is repositioning “H Hilfiger as

a specialty store concept” (“Annual Report,” 2005). There are plans to open five to

ten specialty stores in the second half of 2006 (“Annual Report,” 2005). Eventually,

the company seeks to have 200 stores worldwide (Greenberg, J., 2005).

Tommy Hilfiger

The signature line of Tommy Hilfiger is

identified at the Tommy “Flag” Hilfiger label and

the Tommy “Crest” Hilfiger label. The Tommy

Hilfiger Corporation identifies the target market

6

for their “Flag” and “Crest” labels as those 25-55 years old. The “Flag” collection

consists of casual sportswear for men and women that emphasize “classic with a

twist” style. The “Crest” label consists of tailored clothing and dress furnishing, as

well as dress casual sportswear for men. The company defines the market as

“better apparel segment.” The “Flag” label is distributed worldwide in department

and specialty stores, while the “Crest” label is distributed in the United States and

Canada only.

Tommy

The Tommy brand is a younger edgier line targeted at the 15-22 year

age group. The clothes are designed with a youthful fit. The Tommy

logo has been used on young men’s jeans, junior jeans, and graphic

tees, but as of fall 2005 the company closed the Young Men’s Jeans division

(“Annual Report,” 2005). The “decision reflects the stronger market demand for

more sophisticated premium denim washes rather than promotional commodity

jeans” (“Annual Report,” 2005).

Karl Lagerfeld Brand

In 2004 THC added the Karl Lagerfeld label to its Tommy brand

collections. “This acquisition is an important first step in our long

term strategy,” said the CEO of Tommy Hilfiger Corporation, David

Dyer (Agenda Inc., n.d.). According to the contract, Karl Lagerfeld will create fashion

lines for the Karl Lagerfeld brand for the next five years, with the option to extend the

contract for an additional two years (Fashion monitor Toronto, n.d.). The limited time

frame of the contract is due to the advanced age of the designer.

7

Karl Lagerfeld is one of the most recognizable designers in the world of

fashion. His appearance, with steadfast white ponytail, dark glasses, and black &

white wardrobe, is instantly recognizable haute couture fashion industry. Now in his

seventies, Lagerfeld creates eight collections a year, for Channel, Fendi, and his

own trademark, yet still does not consider retiring (Business week).

The agreement poses to be beneficial for both sides. Karl Lagerfeld brings an

edgier fashion look to the Tommy Hilfiger Corporation. It also raised the level of the

company’s identity within the fashion community due to the respect of Karl Lagerfeld

as a fashion icon. The agreement benefits Karl Lagerfeld by helping to gain a wider

distribution of his trademarks using Tommy’s global retail structure worldwide

(Fashion monitor Toronto).

By entering in this acquisition, THC is trying to catch up on the latest trend in

consumer apparel industry: a demand for more upscale, fashionable clothing.

Despite this, it is still questionable whether this acquisition will help increase sales.

Karl Lagerfeld is more appealing to women, but in the past it has been in the men’s

clothing segments where the Tommy brand has struggled. A strategic step toward

improving its figures in the men’s clothing segments was hiring one of Armani

executives, Rodney Hutton to manage the new Karl Lagerfeld line.

The Karl Lagerfeld brand combines modern styling and elegance for customers

who desire luxury and exclusivity. It consists of following labels:

The Lagerfeld Gallery is a women’s ready-to-wear collection targeted toward

29-45 year old customers (Tommy Hilfiger Corporation 2004 Annual Report).

It is positioned within designer apparel market and is sold in boutique

specialty stores and upscale department stores worldwide.

8

The Lagerfeld collection is comprised of licensed, contemporary lines for men

and women. The focus is on fashionable, trend driven apparel. Lagerfeld

men’s line is positioned within the designer apparel market and is sold in

specialty stores in Europe and Asia. The Lagerfeld women’s collection is

distributed only in Asia (Tommy Hilfiger Corporation 2004 Annual Report.).

CHALLENGES

Tommy Hilfiger Corporation has had to allocate energy toward facing several

challenges during the last two years. The corporation’s Board of Directors has taken

on three new members as well as a new President and CEO. According to company

founder, Thomas J. Hilfiger, the addition of the new CEO has been useful to himself

as well as the organization. “Over the last few years the boundaries between

our brands had begun to blur, confusing the customer and diluting the

value of our individual trademarks (“Annual Report,” 2004)” Mr. Hilfiger

refers specifically to the new CEO in the company’s annual report as he says, “his

focus on setting strategy and improving the operational side of our business has

enabled me to keep my attention on design and marketing,“ allowing Hilfiger to focus

on redefine the boundaries of the company’s brands (“Annual Report,” 2004).

The most significant recent challenges to the company have been:

THC was required by the U.S. Securities and Exchange Commission,

SEC, to resubmit their 10K financial statements from 2002 to the

present due to tax and lease accounting issues (“Tommy Hilfiger

Corporation Files Annual Report”, 2005).

9

The company has put itself on the auction block and is being

considered by multiple suitors. THC is attempting to “create value and

restore its fortunes” (Schonberger, 2005). This is a strategy that is

being observed by many financial experts, especially since Wal-Mart

has been identified as a potential suitor. The company reports that a

potential buyer will be announced in December 2005.

Wholesale business in the U.S. is suffering from distribution chain

inefficiencies. The company has been leaning out its operation by

reducing staff (“Annual Report,” 2005).

The brand is diluted in the U.S. and specific product lines are blurred.

This is identified as the primary reason that the company’s retail and

wholesale profits have dropped considerably (“Annual Report,” 2004).

THC has recently eliminated low performing wholesale and retail

business units.

The company has been plagued over the years with rumors of racism by the

company’s founder, Thomas J. Hilfiger, being spread through the media and over the

Internet. The direct financial impact of this has not been reported. The company

has tried to mitigate the damage by including a “Rumors” page on its web site with

links to other sources in an effort to confirm that the rumors are false (Tommy

Hilfiger: Rumors, 2005). One prolific rumor stated that Hilfiger made racist remarks

while a guest of The Oprah Winfrey Show. Responding to this, the Rumor page of

the Tommy website quotes Oprah as saying, “The rumor claims that clothing

designer Tommy Hilfiger came on this show and made racist remarks, and that I

then kicked him out. I just want to say that it is not true because it just never

happened" (Tommy Hilfiger: Rumors, 2005).

10

FINANCIAL PICTURE

The financial performance of Tommy Hilfiger Corporation over the past few

years has been relatively stable when the international and domestic businesses are

considered together. The company experienced significant losses in the U.S. that

were offset by significant revenue increases in European markets and by

restructuring efforts (“Annual Report,” 2005). The company has benefited by

hedging funds in foreign currency markets. THC has also profited by moving

corporate headquarters to different locations to reduce tax exposure, and using inter-

company transactions to shift tax liabilities. However, as a result of these actions,

THC was investigated by the U.S. Attorney’s Office for the way commissions were

handled pertaining to taxes for the company’s Hong Kong business(“Annual report,”

2004). Subsequent to the investigation, other changes were made in THC’s

accounting practices, and these were included in the recently released restated 10K

reports for 2002 through 2005. Although the company’s accounting practices were

found to be incorrect, the company eluded criminal prosecution. However, they did

have to pay over $18 Million in taxes and interest for these years (“Annual Report,”

2005).

An analysis of performance ratios was done with 2004 financial statements

THC and competitor Polo Ralph Lauren to identify significant differences. The

following summary provides a comparison:

THC’s 2005 profitability was about half of Polo’s, where as in 2004

THC’s profitability was 30% higher than Polo. This change is

significant and is attributed to losses by the U.S. division of THC and

adjustments to the company’s accounting practices. Earnings per

11

share for each company were also weak. Polo pays regular dividends

to shareholders, while Tommy does not.

THC’s liquidity is slightly better.

THC’s solvency is better.

The data shows that THC is currently not as strong as Polo in this industry.

Its lack of profitability and the fact it does not pay dividends to its shareholders

suggest that unless an investor was willing to buy and hold shares in hopes of the

company becoming more profitable, THC would not be a favored investment. When

the company announced that it was up for sale, its stock prices increased, but this

may have artificially increased the stock’s market value. Once a purchaser is

finalized the stock price may drop, resulting in a loss to investors. Company

executives for Tommy Hilfiger predict the company will generate revenues for 2006

similar to net revenues as 2005. They expect a continued decline in their U.S.

market that is offset by increases in European markets (“Annual Report,” 2005).

BRAND COMMUNITY MODEL AND STRUCTURE

Tommy Hilfiger Corporation operates in an environment where perception

rules over the tangible. Their product itself does not provide any more practical

benefit to the wearer than some other garment; it is the subjective and intangible

feelings evoked by wearing the article that provide the lasting relational experience.

THC strives to grow this experience for its consumers because it is the strongest

mechanism by which customers are acquired and retained, which ultimately

increases customer equity.

The company tries to separate itself from competitors through its designs,

attempting to stay on the front edge of the newest styles, yet remain within bounds

12

beyond which the style would be acceptable by only the earliest adopters. This is a

dangerous game at times – too far in front of the edge and there is an increased risk

of scaring away too many of those who are fashion-conscious but conservative – too

far behind and the product loses differentiation and thus its appeal for the fashion-

conscious audience in general. Regardless what the style, all offerings result in an

adjustment of brand perceptions for consumers and non-consumers.

THC has instituted many methods in an attempt to build a devoted community

for its brand. These efforts are visible to consumers and are aimed specifically at

increasing their awareness of all that the product offers – its personality. This

community is being developed by the company through activities that invite the

customer to experience other connections to the product, company, brand, and other

customers. One of these methods is aimed at their targeted teen group through an

‘exclusive club membership’ opportunity. The company attempts to appeal to its

adult markets through philanthropic activities to improve its company image, and a

special line of apparel is aimed specifically at hip-hop youth. The paragraphs below

describe many of the specific methods THC uses to build its brand community.

Club Tommy

Projecting its motto of ‘Keep it Fresh, Alive, and On Brand,’ CLUB Tommy

(Tommy.com Web site, 2005) has been a useful avenue for the company to express

and cultivate its image with teen customers willing to embrace this kind of

relationship (Keller,2002.). This channel is used to inform members of its

philanthropic activities, fashion shows, events such as parties and celebrity

appearances, company sponsorship of sporting activities, and other activities that

appeal to CLUB Tommy audience. The Web site offers experiential opportunities for

13

Club Tommy members including advanced views of new products, streaming fashion

show videos, screensaver downloads, and rich media games. Members also have

preferential access to catalogues, emerging new artist songs, and backstage

coverage. CLUB Tommy members are regularly sent newsletters and emails

promoting invitations to parties and previews of new Tommy brand fashions. CLUB

Tommy hopes to encourage its members to be ambassadors for the brand.

Participation or exposure to these activities help customers become aware of all

facets of the brand community.

Tommy Foundation

The Tommy Foundation directs the philanthropic activities of the company in

the U.S. The objective of the foundation is to support many health-related

organizations and various cultural programs that impact a diverse population of

American youth.  The foundation espouses that education is the cornerstone for

today's youth and will be a key factor for America to survive and remain competitive

in the global marketplace (“Annual Report,” 2005). The foundation believes that

placing a strong emphasis on exposing youth to quality education and career-related

opportunities will help achieve this objective.

The Tommy Foundation worked with the Boy’s club of New York to send 25

scholar-athletes and staff members to Cuba for a two-week educational and cultural

tour by making a seventy thousand dollar contribution (Cuba News, 2001). The

Foundation claimed that through this contribution its aim was to enrich the lives of

youth, while implanting a sense of purpose by building self-esteem and

strengthening the leadership skills of the youths selected to participate in the

14

program. The foundation has contributed approximately three million dollars for a

variety of major renovations including the Fresh Air Fund's campsite and Camp

Tommy (Cuba News, 2001). In addition, the foundation has made a five million

dollar commitment to the Washington, D.C. Martin Luther King, Jr. National Memorial

Project Foundation fund to build a memorial for Dr. King. These philanthropic

activities help the customer experience the brand through the company connection

to ‘good works’.

The Hip-Hop culture

The Hip-Hop culture, which was thought of as an urban phenomenon among

the 12 to 34 year-old demographic in the 1990s has now crossed borders from the

streets of New York City to the fields of Iowa (What is Cool?, 1998). THC has

actively pursued this audience to capture this entire community. Identified as "urban

marketing" by THC, this effort now expands across the entire U.S. after a successful

campaign on the East Coast. The primary geographic area for this revenue stream

is not metro areas like New York City, Chicago, or Los Angeles; it is urban Middle

America, allowing THC to cultivate another large segment of American buyers (What

is Cool?, 1998). Although the nation is separated into diverse geographic areas, the

hip hop culture is a unifying force for youth across the country and the company has

attempted to capitalize on this to extend its reach. THC is using the product and its

brand to augment an existing connection customers have to each other, embedding

the brand experience into the culture that already exists.

SWOT ANALYSIS

15

Strength

The strong brand reputation among baby boomers and certain ethnic

populations, like that of the Hispanic and Black communities, have crated brand

value that translates into profit for the company. The strong distribution system

throughout the world has made it comparatively easier for the company to deploy

into new markets. This is illustrated by from the company’s move into the

competitive European markets, which are facilitated by the company’s experienced

upper management. Networks, contacts, knowledge, and experience in the industry

possessed by THC’s top management, like Thomas J. Hilfiger and David F. Dyer,

are assets to both the company’s operation and reputation. The company also

enjoys higher production flexibility because of its strong base in the south-east Asian

countries where product production transpires. This was an absolute competitive

advantage for the company for company until it was found and exploited by its

competitors, which is still a potential advantage to the company. The company was

accepted as a creative and an innovator in the 1990s becoming a top trend setter for

the industry. Though the company is facing more competition, has lost a significant

market share to its rivals, and its reputation as a style trend setter has been

diminished, it still influences the trends in the industry to a certain degree. The

company was one of the first to promote the Hip-Hop style and has a strong

background for it. This has been beneficial for the company as the culture has

started to spread across the country, carrying Tommy along the way.

Weakness

The company has positioned itself as a true American company with its red,

white and blue logo, is now expanding globally. The logo, which is instantly

recognizable as a symbol of American culture, may hinder the company’s ability to

16

grow exponentially in the global market. Failure to adapt to the new cultures it enters

may hinder the acceptance of the brand and the growth of the company. THC has

not previously been flexible in adapting the various regional cultures it operates in,

rather has taken an ethnocentric approach by trying to implement its own culture into

new markets.

Another issue that weakened the brand’s value in the eyes consumers is over

licensing of the Tommy brand. The extensive licensing has resulted in the Tommy

brand transforming from a premium brand supplying premium goods into a

discounted brand selling commodities. These two factors reduced the brand image

and brand value the company had among its customers. The resulting effect is

consumers switching brands.

In the recent past the company has weakened its position and gotten itself

into trouble through its accounting practices. An investigation by the SEC resulted in

the company paying the government and additional $18 million for taxes and interest

accrued. The company also, has not paid dividends to its stockholders in the recent

past.

Opportunities

When analyzing THC opportunities and threats we are looking on the external

factors that Influence Company’s positioning in the market. These factors are not

under company’s control; at times they come unexpectedly and cause adjustments

in long term strategy to adapt to new conditions.

The apparel market growth in the Asia and Eastern Europe and diminishing

trade restrictions in China it could tremendous opportunities for THC to expand in

these areas. THC already licensees in Asia and that can pave the way into further

exploring Asian and Easter European countries.

17

Diversifying the target market of THC by acquiring the new Karl Lagerfeld

brand was a good opportunity, but with the growing competition in apparel industry it

becomes more difficult to find a customer for a new brand, even one which is

inspired by “fashion icon”. The Karl Lagerfeld brand is a window of opportunity if

THC manages to bring that potential into the light.

Strengthening relationships with the customers will contribute to keeping the

brand popular. In the saturated, highly competitive apparel industry, there are few

constraints to keep customers from switching between brands, service and positive

experience by shopping become and important avenue to retain loyal customers. A

company’s skill in retaining loyal customers is crucial. The new THC concept that

includes opening new specialty stores designed in a way to create Tommy’s

“authentic American “atmosphere, is dedicated to finding its way into heart of the

customer and gaining their loyalty (Greenberg, J., 2005).

The growing popularity of online shopping is another opportunity to increase

the sales and reach those customers that have limited access to Tommy’s

trademarks. THC has the opportunity to customize and individualized their product

via its website. There is the opportunity to, for instance, give shoppers the ability to

customize shoes, help customers to choose outfits that fit to their particular body

measurements, or give trend and color advice. All of which would add value to the

customer’s shopping experience.

The company’s decision to put itself on the auction block may be an

opportunity for growth. It may inspire a renewal for the company. Much of what will

result from who buys the company.

Threats

18

Counterfeiting has always been a dark side of luxury and fashion industry.

International Chamber of commerce estimated the annual value of counterfeited

goods by €500 billion (Mintel, n.d.). Good that are heavily tied to recognizable logos,

such as Tommy’s, are popular by counterfeiters because they are easy to copy.

Counterfeiting undermines company identity, status, attitude of the customers toward

product quality.

The political situation in the world now does not favor the U.S. as the country

and its symbols become less popular in the world. This is directly affecting the

Tommy brand, a symbol of American style. Additionally, THC’s commitment of

reconnecting with customers by delivering new “fresh American style” does create

the impression that THC understands what it means to be “global” (THC Annual

Report 2005). We would rather recommend THC create the products appealing

more to the countries where they are operated or at least not be too American style

speaking, at least outside US. The speed of life and fashion are accelerating. To

operate successfully in the apparel industry means being the first to catch the latest

trends and changes in consumer demand and to adjust for these changes. If a

company does not, consumers will move to another brand, making it hard to regain

previous market share.

The company’s decision to put itself on the auction block was mentioned

already as opportunity, but it can also be a threat if the buyer does not share and is

not willing to carry forth the company’s primary mission, vision, and goals. In this

situation the whole company identity that was created throughout the years can be

destroyed. This could happen if the company will be bought by its competitor.

SUMMARY

19

The dynamic framework supporting the brand community is complex. It

requires a significant effort to foster the relationships that need nurturing in order that

the customer experience as many aspects of the brand as possible. Multiple

marketing tools must be used to understand what the product can truly offer the

customer in terms of a relationship experience in order that the price, place, and

promotion aspects can be adjusted to acquire and maintain the customer’s business.

Once the marketer has assessed the needs and initiated a model, he/she must

continually measure customer satisfaction and adjust the company’s offering or

product and the pieces that build the total brand community experience. At the root

of this effort is the company’s wherewithal to support the undertaking with

appropriate resources and continue investing in the brand. THC has invested in

these activities, but due to a loss of focus and/or appropriate support, the company

has shifted off course and lost brand value in its core market and suffered financially

as a result.

THC is making moves to correct its image in the U.S. market. After

cheapening its brand image through efforts to compete with lesser quality brands, it

has recognized its folly and is pulling out of those distribution venues. It is expected

that THC will attempt to take the following steps to address its U.S. situation:

Continue to bring its brand value up by isolating itself from low-cost brands

and distribution channels. It will attempt to keep its prices high, suffering

some financial losses for the next three years in an attempt to make the brand

less accessible to increase demand at the higher end.

Reduce logo size on many of its clothing targeted at the increasingly non-

logo-centric customers in the 15 to 22 age group. Making its logo disappear

for a while will help increase its appeal when the company brings it back.

20

Continue its efforts to associate itself with famous talent in the music and

movie community to foster its image of being current with what is happening.

This will be an area of confusion for THC, however. They are expected to

continue to try to be everything to everybody in hopes of hitting on the right

image. They don’t appear to have chosen a specific artist for their image, so

are expected to still confuse their customers with a variety of perceptions.

Improve its e-commerce activities to offer a more exciting look and feel to its

Internet savvy consumers. This includes supporting its Tommy Club efforts

with more dynamic offerings that pull customers deeper into the brandfest

relationship and make the virtual experience as real as possible.

THC is not expected change anything in the accessory market. It already

commands a reasonable profit from merely licensing others to use the THC

logo on upscale jewelry, purses, and other apparel, and these items have not

been offered to low-cost distribution venues.

A conflicting message is broadcast by Walmart’s apparent interest in acquiring THC.

Although bringing Walmart’s value up, this would most certainly lessen THC’s brand

value. The most recent news suggests that Walmart may have stepped back from

the list of suitors, so this may end up not being an issue. However, whoever does

purchase the company will have an effect on the brand depending on consumer

perception of them.

In Europe, THC will continue to push its successful efforts to advance its more

logo-centric customers. In the short term, THC will push its successful products into

Europe and look for opportunities for additional acquisitions. After a few years, the

company is expected to step up its segmentation efforts in Europe markets to search

out areas it has not yet tapped. Its experience in the US should have been a telling

21

lesson for them and it is expected that they will maintain their image by staying away

from lesser brands.

In summary, Tommy Hilfiger Corporation is expected to fix some problems,

but still project a confusing image to its public. Its Annual Report speaks of being an

international company that appeals to the world, yet it describes how strongly its

values are American and represents the values of the country and its people. Watch

for its U.S. business to decline for the next five years and unless it stops speaking

out of both sides of its mouth, its European success will plateau in the same time

frame as international perspectives change to become less supportive of an

American company trying to cater to the world.

22

WORKS CITED

Agenda Inc. (n.d.). Hilfigers buys Lagerfeld http://news.agendainc.com/mt-agenda/content/archives/2004/12/hilfiger_buys_l.html

Associated Press. (2005). Tommy Hilfiger Lowers Profit Estimate, Says Some Results Will Need to Be Restated Slightly. Retrieved October 11, 2005, from

http://biz.yahoo.com/ap/050930/tommy_hilfiger_restatement.html?.v=4.

Associated Press. (2005). Fashion Company Tommy Hilfiger Corp. Reportedly Making Plans to Put Itself on Auction Block. Retreived October 12, 2005, from

http://biz.yahoo.com/ap/050818/tommy_hilfiger_sale.html?.v=9.

Belk, R. W. (1988). Possessions and the Extended Self. Journal of Consumer Research, 15, 139-161.

Business Week Online. (2005). BW 50: Coach's Split Personality. Retrieved November 13, 2005 from

http://yahoo.businessweek.com/magazine/content/05_45/b3958072.htm.

CBS.com. The Cut. Retrieved November 28, 2005 from http://www.cbs.com/primetime/the_cut/.

Cuba News. (2001). Tommy hilfiger Corporate Foundation teams up with the Boys' Club of New York for a cultural exchange trip to Cuba. Retrieved November 15, 2005, from http://www.cubanet.org/CNews/y01/jun01/19e3.htm

Domenco, S. (2000) Loosing his shirt. New York Magazine, Retrieved December 5, 2005 from http://www.newyorkmetro.com/nymetro/news/politics/columns/citypolitic/3525/index.html

Fashion Monitor Toronto (n.d). Tommy Hilfiger to Acquire Karl Lagerfeld business. Retrieved December 11, 2005, from http://www.dexigner.com/fashion/news-g3396.html.

Greenberg, J. (2005). Reinvention of H: Hilfiger to Launch Global Lifestyle Chain. WWD: Women’s Wear Daily, 190, 1-13.

Hip-hop style: 20 years in the making. (1998). Hip-hop style: What is cool? Retrieved November 08, 2001, from http://www.pbs.org/newshour/infocus/fashion/hiphop.html

Infomat. (2005). Who’s Who: Tommy Hilfiger, Fashion Designer. Retrieved November 11, 2005, from http://www.infomat.com/whoswho/tommyhilfiger.html.

23

Keller, Kevin L. (2002) Customer-Based Brand Equity. Strategic Brand Management, Upper Saddle River, NJ: Prentice Hall 75.

Matlack, C. (2005). Karl Lagerfeld. Business Week. Retrieved December 7, 2005, from http://www.businessweek.com/magazine/content/05_22/b3935424.htmMintel reportsThe Global luxuary report.Global. august 2004http://0-reports.mintel.com.oasis.oregonstate.edu/sinatra/reports/search_results/show&&type=RCItem&page=0&noaccess_page=0/display/id=71198/display/id=115550&section#hit1

MTV.com. Welcome to the World of the Rich Girls. Retrieved November 28, 2005, from http://www.mtv.com/onair/rich_girls/.

PBS CEO Exchange. President and Chief Executive Officer, Land’s End, Inc. Retrieved November 26, 2005, from http://www.pbs.org/wttw/ceoexchange/episode_103/ceo_2.html.

Routers. (2005). Apax, Oaktree bid for Hilfiger-sources. Retrieved November 13, 2005, from http://biz.yahoo.com/rb/051109/retail_tommy.html?.v=1.

Tommy Hilfiger Corporation 2005 Annual Report. (2005). Retrieved November 25, 2005, from http://media.corporate- ir.net/media_files/irol/98/98332/Tommy_Final_2005.pdf.

Tommy Hilfiger Corporation 2004 Annual Report. (2004). Retrieved November 19, 2005, from http://library.corporate-

ir.net/library/98/983/98332/items/158625/2004_annual.pdf.

Tommy Hilfiger Corporation 2003 Annual Report. (2003). Retrieved November 19, 2005, from http://library.corporate-

ir.net/library/98/983/98332/items/158626/2003_annual.pdf.

Tommy Hilfiger Corporation Takes Further Action to Better Align Its U.S. Wholesale Cost Structure. (2005). Retrieved October 11, 2005, from http://biz.yahoo.com/prnews/051006/nyth175.html?.v=19.

Tommy homepage- Mission statement. http://www.tommy.com/about/about_us.aspx?cat=Mission

Tommy Hilfiger Press Release. (2003). Tommy Hilfiger Biography. Retrieved November 9, 2005, from http://investor.tommy.com/phoenix.zhtml?c=98332&p=irol-newsArticle&ID=727775&highlight=.

Tommy Hilfiger: Investor Relations. (2005). Biography: Thomas J. Hilfiger. Retrieved November 28, 2005, from http://investor.tommy.com/phoenix.zhtml?c=98332&p=irol-govBoardBio&ID=138873.

24

Tommy Hilfiger: Investor Relations. (2005). Biography: David F. Dyer. Retrieved November 28, 2005, from http://investor.tommy.com/phoenix.zhtml?c=98332&p=irol-govBoardBio&ID=138875.

25

WORKS CITED

26