Macy's, Hilfiger venture is effort to combat losses to discounters

October 27, 2007|By Barbara Rose | Barbara Rose,Chicago Tribune

CHICAGO -- Department stores enjoyed their century in the sun, when they were arbiters of fashion and shoppers looked to them for the newest designs.

The designers have had their day in the sun, too, with companies like Tommy Hilfiger opening their own boutiques and going public, selling investors on the idea that a big name is worth big money.

Now we've entered the era of discounters and specialty stores, and the decision by Macy's and Hilfiger to team up in an exclusive arrangement underscores how each is trying to regain momentum.

Macy's, the national department store chain with several stores in the Baltimore area, announced an agreement yesterday for exclusive rights to sell Hilfiger's biggest clothing lines.

Macy's will feature the label in national marketing campaigns, expand its Hilfiger offerings and place them more prominently in stores, while Hilfiger will phase out its sportswear at other retailers such as Bon-Ton Stores Inc.'s Carson Pirie Scott and Dillard's.

By fall 2008, the designer's sportswear will be available only at Macy's, the designer's own stores and tommy.com. Licensed products such as accessories and fragrances will continue to be sold more widely.

Retail experts said the deal is a coup for Macy's, which is trying to boost its sales by offering merchandise customers can't get anywhere else, and it's potentially a win for Hilfiger, which is trying to reinvigorate its brand and sales.

"There's no question both brands are very well known, but they've both faced problems in recent years," said Laura Ries, an Atlanta marketing consultant. "This is a good answer for both of them.

"For Hilfiger, the exclusivity will ensure Macy's promotes them and gives them lots of attention and focus," she added. "For Macy's, [it will help] give people a reason to shop there."

The deal is the latest in a slew of exclusive agreements by store chains with designers as a way to differentiate themselves in a fiercely competitive environment. But the Macy's move stands apart because the Hilfiger brand is so widely known.

"Just about every department store in the U.S. had a Hilfiger boutique at the peak of his fashion run, 15 to 20 years ago," said retail consultant Dan Skoda, former president of Marshall Field's when the chain, now part of Macy's, was owned by Dayton Hudson.

But the designer expanded into too many categories and markets, and its brand lost some of its cachet, experts say. It struggled with fashion makeovers, jumping to an edgy urban look and then back to something more classic.

The company was acquired for about $1.6 billion in December 2005 by private equity group Apax Partners. The Macy's deal sparked speculation yesterday that Apax is positioning the business for a public offering.

"Off of this deal, I wouldn't be surprised to see Apax making them public again," said retail analyst Brian Sozzi of Wall Street Strategies in New York. "There should be a nice little boost" to Hilfiger's results from additional promotion, sourcing efficiencies and other synergies.

A Hilfiger spokeswoman declined comment on the speculation. But in a statement the designer himself said the recent consolidation of department stores has made the alliance "more compelling and logical."

The deal also could improve Macy's results, which have been disappointing since the 2005 acquisition of May Department Stores Inc. and the consolidation of regional chains such as Marshall Field's and Hecht's under the Macy's brand, which alienated some customers.

Barbara Rose writes for the Chicago Tribune.

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