Tommy Hilfiger CEO: Flagship stores are history

Brand is the latest to desert its Fifth Avenue flagship store in Manhattan amid digital strategy shift

Tommy Hilfiger Global and PVH Europe chief executive Daniel Grieder says the store of the future looks much different from what shoppers are accustomed to. Alamy

Fifth Avenue in Manhattan has a reputation for being one of the most expensive shopping streets in the world. Home to flagship stores of famous American brands like Nike, Apple and Tiffany & Co, the thoroughfare was once the premiere destination for designer-loving shoppers from around the world.

But in recent years, the street is beginning to lose its lustre with brands like GAP and Calvin Klein shutting up shop there. The latest to desert Fifth Avenue is all-American brand Tommy Hilfiger, who announced they would be closing their flagship store last month.

While closing a flagship store might be a sign of financial trouble, Tommy Hilfiger, which is owned by New York clothing company PVH, is one of a few famous American brands to be bucking the downward trend when it comes to retail sales in the US.

The brand’s revenue in the last quarter of 2018 increased 2 per cent to $447 million and in the business as a whole revenue was up 2 per cent to $1.2 billion.

So why give up its prime location in the city where people come from across the world to shop?

"Big flagship stores are history not only for us but in general," Tommy Hilfiger's CEO Daniel Grieder told The National at PVH's headquarters in Amsterdam.

“Nobody wants to go into such a big shop anymore and get lost in too many garments thrown in their face. It’s like when you get a plate on your table and there’s too much food, you lose interest.”

The flagship store was financially viable, according to Mr Grieder.

“It’s not your most profitable store and it was relevant to be there in the past. But our store of the future looks different,” he said.

As more retailers focus their efforts away from brick-and-mortar stores to online shopping, Tommy Hilfiger is rolling out a new concept for consumers. In the “stores of the future”, which have begun to be rolled out globally, the brand has reduced clothing items on show in favour of digital monitors where customers can access their entire online collection. If the item is not in stock, then it can be purchased there and delivered free of charge to the customer’s home or in store.

On business-to-business sales, digital-centric showrooms have replaced huge stores full of sample clothing, transforming the way the company sells its products to retailers. Digital monitors allow buyers to style different looks aided by a small physical book of sample fabrics for its sportswear and preppy basics that evoke its 1980s American origins.

Although the company is shutting stores in the US – Tommy Hilfiger also announced they would be closing their Miami branch – in the rest of the world it is a different story. In the GCC region, the big stores in shopping malls are far from under threat of closure, in fact they are performing well.

“I see a big future there,” Mr Grieder said. “The youth in the Middle East, where do they go? The shopping centres. In Dubai Mall, you can eat there, you can even ski.”

It is the young consumer that Tommy Hilfiger has always tried to target. Saudi Arabia – where almost 60 per cent of the population are under 30 – is a hotspot for expansion. While the European market currently has the largest number of stores, the potential of the Middle East is alluring to the brand. In total, 52 per cent of Tommy Hilfiger’s global revenue came from Europe, the Middle East and Africa in 2018, up 12.5 per cent on the previous year.

“The opportunities are endless [in the Middle East],” said Mr Grieder. “I think we just have to adapt to the market needs because they are different and that’s fine. The brand is very well-received.”

Calvin Klein, another PVH brand, saw its revenues in North America decrease in the last quarter of 2018 by 7 per cent to $430 million in comparison with the previous year. But for international sales in the same period, the brand performed well, reporting an increase of 2 per cent to $523 million in revenues.

In an age of protectionism, however, the global market is set to pose different challenges for the brand in the future. China has been earmarked as a key region for Tommy Hilfiger’s expansion plans and Asia is the brand’s fastest-growing territory. The company chose Shanghai to launch its brand-new collaboration with Formula One driver Lewis Hamilton.

While the effects of Donald Trump’s trade war with China have not begun to bite yet, the prospect of higher tariffs for many American brands is a worrying one. US sportswear retailer Under Armour announced last year it would be sourcing less of its products from China in the future.

Mr Grieder said Tommy Hilfiger was prepared to look for other opportunities in Europe or Africa if higher tariffs came into play.

“We are prepared but we still go on,” he said. “It’s the trade war today, it’s Brexit today but tomorrow it’s something else, somewhere else. As a company you need to adapt to these situations.”

Mr Grieder said political instability was his biggest fear as a chief executive of an international corporation.

“The world is unpredictable. In America, when a new president comes in, they can change the entire country,” he said.

“All the rest you can control - apart from the weather.”