June 22, 2015

Inside Tommy Hilfiger’s American Dream

Inside Tommy Hilfiger’s American Dream

BUSINESS OF FASHION – In our latest ‘Inside Fashion’ interview, BoF’s Imran Amed sits down with Tommy Hilfiger to discuss how the American fashion designer built his global empire.

LONDON, United Kingdom — Tommy Hilfiger has come a long way since setting up his first fashion business at the age of 18. With only $150 in his hand, Hilfiger opened his first store — called People’s Place and inspired by the rock legends of the time — by working with local garment manufacturers to bring big city styles to Elmira, his hometown in upstate New York.

“There was a fashion music revolution taking place and I very much wanted to be a part of that scene,” Hilfiger told BoF in his London showroom. “It was all about what the musicians were wearing. Seeing Jimi Hendrix and The Beatles and The Rolling Stones and The Who dressed in such incredible ways made me really want to be a part of that world.”

The business grew rapidly and Hilfiger opened stores on college campuses all over New York. But in 1977, facing the local recession, overexpansion and growing competition, People’s Place was forced to file for bankruptcy protection.

Hilfiger then moved to New York City to try his luck there. “It was very difficult to get a job without having gone to design school. I had to knock on doors and beg people to hire me,” he recalled. Hilfiger soon found work as a freelancer, designing for various denim companies, before meeting Mohan Murjani, an Indian businessman, who encouraged him to set up a label under his own name, fulfilling Hilfiger’s longstanding dream.

Hilfiger instantly knew that Murjani would make a perfect business partner. “When I met Mohan, it felt like we had known each other for years. It was like a meeting of the minds and we knew that we would do well together,” he said. “When this opportunity came about, I couldn’t refuse it. We went into business in 1985.”

To launch the brand, Hilfiger and Murjani worked with legendary ad man Goerge Lois to create a bold advertising strategy to put the Tommy Hilfiger brand on the fashion map. The ‘Hangman campaign’ compared the upstart Hilfiger to American fashion giants Calvin Klein, Ralph Lauren and Perry Ellis.

“It caused such a stir,” he recalled. “It was all over the news and they were saying, ‘Who does he think he is? He can’t hold a candle to these guys.’ But, people came into my store and the clothes started selling. It worked.”

But a true American dream doesn’t come without its challenges. In 1989, as Murjani ran into financial difficulties, Hilfiger was forced to seek out new partners to sustain his business. During a trip to Hong Kong, Hilfiger’s saviour appeared in the form of clothing magnate Silas Chou and his business partner Lawrence Stroll, who agreed to form an alliance with Hilfiger on the spot, creating Tommy Hilfiger Inc. and giving the designer the financial backing he needed.

In 1992, Tommy Hilfiger became the first fashion company to go public on the New York Stock Exchange, leading to a decade of hyper growth. By 2000, the Hilfiger brand was generating $2 billion in sales a year. “We built it from $25 million to $50 million, then it was $100 million, then $500 million, then $1 billion, then $2 billion,” said the designer.

“I re-designed all the classics that I thought would be relevant for young people at the time. I took authentic hockey jerseys, football jerseys and basketball jerseys, and did patches and logos and really big, bold statements — and they sold like crazy,” he said.

By the early 2000s, however, the Hilfiger brand was overexposed and overdistributed, leading to plummeting sales and heavy discounting. In 2005, annual revenues had slowed to $500 million. “Every quarter, we had to show the markets that we were growing. We had such phenomenal growth in the beginning that they expected the growth to continue,” he said, reflecting on the pressures of operating as a public company and the risks of growing too quickly.

“We were in a dilemma on what to do with the brand, because, one day, it wasn’t cool anymore. Abercrombie had come around. The Gap was hot. Banana Republic was hot. All of a sudden, the landscape was changing,” he said.

Now, Hilfiger had to re-trench and re-strategise to find a new path to growth. In 2006, the company was taken private in a management buyout with private equity firm Apax, which saw growth potential for the brand in Europe. Hilfiger implemented a new global premium positioning strategy, led by chief executive Fred Gehring. In 2010, the restructured business was sold to Phillips-Van Heusen Corp (PVH) — also owners of Calvin Klein and IZOD — for $3 billion.

Today, as ‘principal designer and visionary’ of a company that generates global retail sales of more than $6.7 billion per year, Tommy Hilfiger is focused on securing the future of the brand he has worked so hard to build. “I’m always worried of becoming too complacent. I’m always looking ahead and thinking about how we can evolve and become better at everything we do,” he said.

“I think it’s important for designers to understand the business as much as possible. You have to make clothes that actually sell and become profitable and can be wearable, otherwise why be in the business? In order to do all the things that we do — the fashion shows, the advertising, the showrooms, the stores — it takes a lot of funding,” he added. “We need money to sustain our creativity.”

On the company’s future ambitions, Hilfiger said: “I would like to continue to grow and evolve as a global lifestyle brand with a premium positioning, which I think is a sweet spot. I’d like to expand our women’s and women’s accessories business, continue to be innovative in advertising and marketing, embrace social media and digital, surprise the consumer with new ideas, but always back it up with the best products you could offer at the best value.”

Watch the full in-depth interview with Tommy Hilfiger above. www.businessoffashion.com