Tommy's Bold Move: Hilfiger in Exclusive Apparel Deal With Macy's

Published: Friday, October 26, 2007

By David Moin and Lisa Lockwood

Changing the landscape of big brands and department stores, Macy's Inc. will be the exclusive retailer of Tommy Hilfiger sportswear in the U.S. beginning next fall.

The firms disclosed Thursday that all Macy's store divisions across the country will sell Hilfiger with the exception of Bloomingdale's, which sells only Hilfiger men's wear in a leased department of its 59th Street flagship in Manhattan.

Macy's stores already sell Hilfiger men's, women's, accessories and home products, but the new arrangement means Hilfiger will phase out its sportswear distribution to other department stores during the next several months as Macy's builds up its Hilfiger assortments and works with the designer on brand extensions and improvements of in-store presentations, including rebuilding and relocating shops to high-traffic spots.

Tommy Hilfiger will continue to operate its own freestanding stores and sell online at tommy.com. All product distributed through Hilfiger's licensees, including home, footwear, accessories, watches and fragrances, will continue to be sold on a nonexclusive basis to Macy's and other retailers.

The exclusive agreement could solve strategic problems for both companies, potentially revving up sales at Macy's, which recently have been tepid, and strengthening the Hilfiger brand. The label has experienced greater acceptance in Europe, where Hilfiger offers more upscale products, and the company is eager to rebuild in the U.S., where stores have cut back on the brand. It is possible that the new Macy's agenda will bring to the U.S. some higher-grade product, comparable with what Hilfiger sells in Europe.

The strategy reflects Macy's drive for exclusives or products with limited distribution, which Terry Lundgren, Macy's chairman, chief executive officer and president, said has grown to represent about one-third of the $27 billion in revenues Macy's generated last year.

Lundgren said other designers have come forward with similar proposals, but he is reluctant to move forward with them. None are as big as Hilfiger. "This is a gigantic business for us," he said.

Asked if Macy's is targeting a percentage of revenues for exclusives, Lundgren said: "We don't have a specific number. We always let the customer decide."

Market sources said Hilfiger does about $250 million in sales at Macy's. Lundgren would not comment on the volume, but he said Hilfiger could become the retailer's largest exclusive brand, with the possible exception of the Martha Stewart Collection, which he said is growing at a rapid pace. "This is a great example of trying to expand the uniqueness of the Macy's offering and put it in overdrive with Tommy."

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