In 2005, Hilfiger was facing five consecutive years of sales dropping eleven percent on
average per year in the United States. This drop resulted in sales going from 1.9 billion in 2000
to 1.1 billion in 2005. However at the same time, the sales of Hilfiger in Europe were increasing
at a steady pace, 82 million in 2000 to 428 million in 2005. Internally, fears began to grow that
the troubles in the United States would begin to spill over to the European market. The
company’s troubles became apparent to the public when the company began to change its
segment reporting by separately reporting the international and American wholesale reports. In
an attempt to compensate for the troubles in the core of Tommy Hilfiger’s brand, the company
began to acquire and expand, starting with purchase of the rights to the Karl Lagerfeld brand.
The American business of Tommy Hilfiger needed to be completely redefined in order to prevent
it from taking the whole brand down with it.
Before the ownership of the Karl Lagerfeld brand, Hilfiger was facing a serious dilemma
with the brand perception that they were receiving. They had moved from the upper-moderate
categories of the department stores into the lower better category. This repositioning happened as
the consumers down marketed the brand after noticing the worsening quality, style and fit of the
