Tommy Hilfiger just opened a 22,000-square-foot store on Fifth Avenue in Manhattan, a move that, in this economy, some might call insane.
But the Hilfiger line, like many midrange designer brands, is growing, while other labels, notably at the high end, are struggling to hang on to market share. “We are positioned very well with accessible, affordable luxury and this is something we have been doing for 25 years,” the designer said last month during New York Fashion Week.
Very well indeed. Sales of the Tommy Hilfiger Group, a unit of Apax Partners, a private equity investment group, rose 21 percent, to $1.6 billion, for the financial year that ended March 31, according to Fred Ghering, Hilfiger’s chief executive officer. Hilfiger sales for this financial year are expected to rise in the single digits, much less than in previous years, but they will still grow in a stagnant market. For the record, a Hilfiger cocktail dress sells for $450 and a camel hair coat goes for about $750.
Brands like Tommy Hilfiger, D&G from Dolce & Gabbana, or Tory Burch, all selling below the luxury designer category, are growing now because they expanded or reorganized, repositioned collections or introduced new lucrative lines before the first signs of the recession.
“There is this white space between major designer collections and contemporary lines,” said Robert Burke of Robert Burke Associates, the New York luxury consulting company. “Designers like Tory Burch, Phillip Lim and Alexander Wang are filling that gap. These collections provide their own great creativity at a great value.”
This “white space” has, until now, been filled with what the American apparel industry calls “bridge collections,” where retail prices for a skirt range from about $250 to $400, and pants cost $175 to $250, Mr. Burke said. Brands have been moving in and out of this category as well as the “contemporary designer” range priced slightly higher, by either changing their price points or going out of business. This dynamic has created opportunities for creative international labels to move in and grab market share.
D&G, the younger Dolce & Gabbana collection, is a great example of this market’s momentum, according to Karen Katz, president and chief executive of Neiman Marcus department stores, adding that it “has the creative DNA of Dolce & Gabbana” and good pricing.
In 2006, the Dolce & Gabbana group brought the collection’s production inhouse, ending a license arrangement with Ittierre group of Italy. Since then, the collection has had average sales growth of more than 8 percent a year, reflecting its more sophisticated styling and fabrications. For the financial year that ended March 31, D&G sales were €706 million, or $1.04 billion, roughly 44 percent of the group’s revenue.
As Mr. Burke noted, the Tory Burch line, founded by the New York socialite in 2004, also is succeeding because it has found its niche.
“When I was researching my business plan, I came up with the idea of what was missing from the market. I wanted beautifully made but accessibly priced clothing,” Ms. Burch said. “Since I had worked in the business, I knew what kind of margins and markups were being made. I new that price was going to be a challenge.”
One of her first steps was to hire Fiona Kotur Marin, who had helped start Old Navy and is an expert on producing in China. The Tory Burch collection is now produced through a group of factories, most of which are in China, a top factor in the collection’s prices. The average retail price of dresses from her fall 2009 collection is about $365, excluding two more elaborate evening gowns that were $1,250 and $1,695, respectively.
The privately owned company will not disclose its revenue, but sales are expected to rise modestly this year to $200 million, thanks in part to increased wholesaling outside the United States.
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Source:NYT
