The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LONDON, United Kingdom — On Sunday night in London, Tommy Hilfiger did what Tommy Hilfiger does best: staged a red-white-and-blue, high-gloss runway production featuring logo-fied streetwear classics and staples of the preppy, Americana wardrobe — all available on sale, right now, online and in stores around the world.
Tommy Hilfiger was one of the first to pivot to the in-season runway model back in 2016 — using the show to present items immediately available for sale — and one of the only designers still invested in the structure.
Sunday's show, inside the industrial Tate Modern museum, marked the release of the fourth collection with Formula One champion Lewis Hamilton, as well as a collaboration with American performer H.E.R. The show was accompanied by an energetic, back-lit choir singing Stormzy and Ed Sheeran hits and featured a slate of British supermodels, including opener Naomi Campbell. The actual clothing presented leaned heavy on recent streetwear trends — gothic typeface and graffiti lettering, utility vests, cargo pants — with a fluorescent neon palette. But the show also included Tommy classics, like a white, waffle knit sweater emblazoned with the American flag and nautical print silk scarves.
These kinds of marketing stunts are helping the apparel brand sell the accessibly priced shirts and blouses that fuel the business: the brand's revenue grew 24 percent between 2016 and 2018, and the most recent quarter was up 12 percent on a constant currency basis to $1.2 billion. Tommy Hilfiger's revenue has grown 123 percent in the 10 years since the brand was acquired by PVH Corp., which also owns Calvin Klein.
This sustained momentum is almost unprecedented for a modern fashion brand. Hilfiger's growth is all the more remarkable in light of the recent struggles faced by similarly positioned rivals, from Calvin Klein to Ralph Lauren, Michael Kors and Diesel.
All these brands are challenged by the fading fortunes of US department stores (Macy’s, which carries all five of the previously mentioned brands, announced earlier this month it would close 125 stores and lay off 2000 employees). The apparel market has also fragmented, favouring fast-fashion brands and direct-to-consumer start-ups over traditional wholesale-dependent labels. There are also new challenges: the coronavirus virus impacting Asian sales and US-China trade tensions.
Founded in 1985, Tommy Hilfiger is an unlikely survivor: it's been decades since the brand was leading the fashion conversation like Gucci does today. It isn't defining a new generation's style, like Brandy Melville and the VSCO girls, or pumping out cheap knockoffs of runway looks like Boohoo and other online fast-fashion players.
By focusing on more profitable regions outside the United States, and keeping its brand identity flexible enough to reflect changing trends — anchored by the founder’s validating presence and an easy-to-recognise colour palette and point of view — the brand is bucking the retail malaise trends.
1. Looking Beyond America
There’s a reason Tommy Hilfiger’s shows have been held in cities like London or Shanghai in recent years: the brand is in the business of selling high-octane Americana to non-Americans.
Two-thirds of sales come from international markets, where sales increased 37.5 percent between 2014 and 2018, while in North America, sales only increased 2 percent during the same period. This has been the strategy for the better part of two decades; many US customers grew tired of the brand around the year 2000 due to oversaturation and discounting.
In Europe, where Tommy Hilfiger was designed and produced separately, the brand was always positioned as premium contemporary, not mass-market. It grew fast throughout the 2000s, and with higher margins. When Apax Partners took Tommy Hilfiger private in 2006, the leadership and workforce shifted from New York to Amsterdam.
Though the brand is now owned by PVH, with corporate leadership out of New York City, its European product is still designed in Amsterdam. In the US, Tommy Hilfiger produces its own menswear and licenses womenswear to G-III Apparel Group.
That Americana lifestyle can be translated globally.
“It’s a better-looking product [in Europe],” said analyst Jane Hali, chief executive of research firm Jane Hali & Associates.
The growth in Europe continues, with revenue increasing by “double digits” in fiscal 2018 to reach $2.2 billion, according to its most recent annual report. Tommy Hilfiger’s international revenue increased 16 percent to $821 million in the most recent reported quarter, while North America sales were flat at $423 million.
The brand has triple the amount of stores in Europe and double the number in Asia than it does in the US. Tommy Hilfiger closed its Manhattan flagship in 2019. It ended its exclusive relationship with Macy’s last spring, with plans to enter Belk, Dillard's and Amazon. A significant part of North American sales are through outlets, with merchandise made specially for the off-price channel.
2. Clear but Flexible Point of View
Much of Tommy Hilfiger’s stability comes down to its crystal-clear identity: its mix of classic American tropes — preppy styles, nautical references, sports silhouettes, clean denim — is instantly recognisable. Instead of a specific garment or category, the brand is associated with its logo, palette and recent collaborations.
Contrast that with sister brand Calvin Klein, which does not have a clear brand identity beyond the sexy advertising campaigns for its lucrative underwear business.
While the brand’s growth over the last decade has been boosted by the return of 1990s trends, its aesthetic has been malleable enough to adapt to changing waves of fashion, whether the look of the moment is boxy jeans, utility vests or 70s-inspired wrap dresses.
“That Americana lifestyle can be translated globally,” said Erinn Murphy, an analyst at Piper Jaffray, adding that the brand has responded to changing trends. “Logo was a much bigger part of their business — that has come down now.”
3. Effective Global Messaging
While Tommy Hilfiger is thought of as “almost luxury” outside the US, said Hali, “the marketing feels the same” across regions. This effort is aided by PVH’s increased control over the brand globally by acquiring foreign operators or establishing joint ventures in growing regions, including India, Brazil, Russia and Mexico. Most global brands aim to buy all their regions, but few have the cash on hand to actually do it.
In April 2016, PVH acquired the 55 percent interest in the joint venture Tommy Hilfiger in China because of the region’s growth potential and higher profitability (the highest operating income business for PVH), and to justify increased marketing, store and digital investments in the region.
That degree of control opens new possibilities for turning the "Tommy Now" runway shows into global marketing moments, which are consistently covered by fashion and lifestyle magazines and sites who count on Tommy Hilfiger as an advertiser. Since 2016, the brand has staged shows everywhere from Milan to Shanghai with internationally famous collaborators, including Hamilton, American model Gigi Hadid and Hong Kong actor Shawn Yue.
Zendaya's first runway show with Tommy Hilfiger, presented in March 2019 in Paris, contributed to a 237 percent month-over-month growth in earned media value, according to Tribe Dynamics, and the collaboration hashtag drove a third of the brand's total earned media value for the month.
The events appeal to a younger generation of consumers, due to the brand's celebrity collaborators, and provide a layer of marketing that can exist above the core product offering in different regions; the items presented are available in limited inventory or distribution, or at higher price points than the bulk of the business in any region, but provide a halo effect for accessible basics.
4. Tapping Tommy Hilfiger, the Founder
The brand’s namesake remains a prominent ambassador for the brand, serving as principal designer and a sort of living embodiment of an American entrepreneurial dream — a celebrity in his own right.
But Hilfiger isn't hogging the spotlight. Where a brand like Ralph Lauren isn't associated closely with anyone beside the founder, and Calvin Klein has no involvement in the brand he founded, Hilfiger is typically seen alongside ambassadors like Hadid and Hamilton.
Hilfiger’s presence also validates the runway shows and collaborations, even if the design approach varies from nautical streetwear (like the Gigi Hadid collections) to feminine 1970s power suits (like the Zendaya collections).
“Tommy has help — he has Zendaya, he has age-appropriate millennials and that is who they are targeting: Millennials and Gen-Z,” said Hali.