What Will Happen to Tommy Hilfiger?

Earlier this week, rumors circulated that London private equity firm Apax Partners was in talks to sell Tommy Hilfiger to Phillips-van Heusen, a US co

Earlier this week, rumors circulated that London private equity firm Apax Partners was in talks to sell Tommy Hilfiger to Phillips-van Heusen, a US conglomerate that owns everything from Calvin Klein to Bass to John Varvatos. Yesterday, the New York Post aimed to prove that those rumors were true.

It's no surprise to those familiar with the Hilfiger brand. You probably know the story: Tommy Hilfiger created denim shop The People's Place in the 1970s, which proved popular but was not managed well; eventually it went bankrupt. Hilfiger regrouped and launched his eponymous brand in the 1980s, which was first seen as a cheap Ralph Lauren imitation. (A billboard in Times Square claiming that Tommy was the next great American designer--despite the fact that he was virtually unknown at the time--was his original claim to fame.)

But by the mid-90s, Hilfiger had inadvertently become a street wear label, favored more by hip hop fans than East Coast preppies. However, instead of riding out the trend, the company chose to further capitalize on it, eventually alienating not only its directional urban market but also its traditional one.

In 2005, Apax--which also owns retailers like New Look--purchased Tommy Hilfiger for about $1.6 billion. They hired CEO Fred Gehring, who worked to rein in Hilfiger's distribution in the US, simultaneously expanding in Europe and Asia, where the Hilfiger brand was still strong. Gehring also transferred the lead design team to The Netherlands.

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Hilfiger is one of the recession's success stories. The brand inked an exclusive deal with Macy's in 2007, and today, Tommy Hilfiger clothes are only sold there and at the company's own stores in the US. This gives the brand good distribution in the US without overdoing it. Abroad, there are hundreds of stores everywhere from Milan to Malaysia. In Hilfiger's 2009 fiscal year, total global sales reached 3.4 billion euros, or $4.6 billion.

So it makes sense that Apax wants to sell now. And PvH seems to be the right company to sell to. Think about Calvin Klein, which PvH also bought from Apax. While it's a mass label and makes its money on mass-produced clothes, its ready-to-wear collection is still well-received. With Peter Som consulting and the collections looking better and better each season, Tommy Hilfiger should follow a similar trajectory.

The one wild card here: Tommy himself. Unlike Calvin Klein, whose namesake designer retired in 2003 after the company was sold to PvH, Hilfiger has no plans to retire. At least he didn't in October 2009 when I interviewed him for another publication. He said that Ralph Lauren, Karl Lagerfeld, etc. were all in their 70s and still working. Hilfiger is just 59, and he wants to stick around for a while, regardless of whom he hires to consult for the company. Will PvH give him that chance? Only the two companies know for sure.