Tommy Hilfiger (B) Turnaround
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Case Code: BSTR492 Case Length: 13 Pages Period: 2005-2010 Pub Date: 2016 Teaching Note: Available |
Price: Rs.500 Organization: Tommy Hilfiger, Apax Partners, PVH Industry: Apparel Countries: USA, Europe Themes: Business Strategy, Brand Management |
Abstract Case Intro 1 Case Intro 2 Excerpts
Introduction
In 2005, Tommy Hilfiger Corp (Tommy), multinational American apparel designer and manufacturer of men's, women's and children's wear, was devising a turnaround plan. Tommy had witnessed a straight four-year decline which had left the investors despondent. The stock, which had once been the favorite of Wall Street, had taken a nosedive such that the company was seen as a prey for hostile takeovers. Moreover, the brand which had evolved as an American classic preppy wear had strayed away from its roots.
In a desperate attempt to meet shareholders' expectations, Tommy had aggressively extended its product line from preppy casual sportswear to bed-sheets, toddler wear, and perfumes, and in the process, lost its core values. This led to a decline in its brand equity. Over-supply led to overexposure of the brand which made Tommy resort to discounting tactics, which only further eroded the brand. Tommy’s CEO, David Dyer (David), who joined the company in 2003, was banking on an acquisition strategy and had convinced the board that inorganic growth for diversification was the only way out. In late 2004, Tommy announced that it was acquiring Karl Lagerfeld, a luxury brand. At that time, consolidation had become the norm in the apparel industry. Tommy's competitor brands like Calvin Klein and Donna Karan had been bought by big conglomerates, which put Tommy at a competitive disadvantage. While Calvin Klein had been bought by Phillips Van Heusen Corp., Donna Karan had sold its trademark to LVMH Moet Hennessy Louis Vuitton SA.
Competition restricted growth in the domestic markets and an overdependence on department stores for retailing had led Tommy into an indecisive quagmire to diversify and offer differentiated offerings at its own retail stores. Its stores left shoppers unimpressed because they found no difference between Tommy's offerings in department stores and in its own stores. As a consequence, Tommy had to close down 38 of its 44 US stores....
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