Macy’s agrees to be exclusive department-store retailer for Tommy Hilfiger brand

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This article was published 26/10/2007 (6589 days ago), so information in it may no longer be current.

NEW YORK – Department-store operator Macy’s Inc. on Friday said it agreed to be the exclusive department-store retailer for Tommy Hilfiger U.S.A. men’s and women’s sportswear in the U.S., beginning in fall 2008.

Financial terms were not disclosed. Under the deal, Macy’s will expand Hilfiger merchandise in every Macy’s division and on macys.com. That means that within the next 10 months or so Tommy Hilfiger sportswear will no longer be distributed in stores like Bon-Ton Stores Inc. and Dillard’s Inc.

The deal is the latest in a slew of exclusive agreements between store chains and designers as a way to differentiate themselves in a fiercely competitive environment. But the Macy’s-Tommy Hilfiger partnership is different from others because of the designer’s immense popularity in the marketplace.

Tommy Hilfiger, which built big shops next to other powerhouse designer names such as Calvin Klein and Ralph Lauren in U.S. department stores, has suffered a sales slowdown in recent years. The label underwent a series of fashion makeovers to turn around sales, but the brand is widely known.

Tommy Hilfiger agreed to be acquired by private equity group Apax Partners for about US$1.6 billion in December 2005. The deal was completed in May 2006.

An exclusive arrangement could help Macy’s turn around its business, which has been disappointing since the 2005 acquisition of May Department Stores Inc. This fall, Macy’s launched an exclusive home furnishings collection with home maven Martha Stewart, which has so far done well.

In a statement, designer Hilfiger said the recent consolidation of department stores has made the alliance “more compelling and logical.”

In a statement, Terry Lundgren, Macy’s chairman, president and chief executive, said that both men’s and women’s merchandise have been performing well.

“Strong and well-established brands like Tommy Hilfiger set Macy’s apart,” said Lundgren. “So offering this brand on a much more exclusive basis is another powerful reason for customers to choose to shop at Macy’s.”

Macy’s spokesman Jim Sluzewski said that the retailer continues to explore exclusive arrangements with other designers.

Michael Appel, managing director of Quest Turnaround Advisors LLC said that stores like Bon-Ton and Dillard’s are not going to be “very happy” losing the Tommy Hilfiger sportswear merchandise, but the exclusive partnership is a good business deal for both Hilfiger and Macy’s.

For Hilfiger, which has seen better success in Europe, it may be “more profitable to limit its distribution” in the U.S., Appel said. As for Macy’s, business has been struggling, and having exclusivity could help pull in shoppers from other competitors, he said.

As part of the deal, Macy’s will increase the number of Hilfiger shops in high-volume Macy’s stores, renovate and upgrade existing shops and feature Hilfiger collections in its marketing campaigns.

The companies will also work together on new ventures and brand extensions, Macy’s said.

Tommy Hilfiger will continue to operate its own freestanding stores and sell its products on tommy.com. All product distributed through Tommy Hilfiger’s various licensees will continue to be sold on a nonexclusive basis through Macy’s, as well as other store accounts, the company said.

Macy’s shares rose 54 cents, or 1.66 per cent to close at $33.00.