Talking Tommy: Hilfiger Shares Fall as Wal-Mart Eyes Brand

Shares of Tommy Hilfiger Corp. and Wal-Mart both fell on the news that Wal-Mart Corp. was interested in possibly acquiring the brand.

"Wal-Mart needs content in apparel," one analyst said. "When the company talks of acquisitions, one thinks of Wal-Mart making international purchases to expand overseas. Adding Tommy sounds out of left field, but it's not impossible."

The analyst noted the discounter is known for growing brands internally, but has had a hard time creating the types of brands that drive traffic to the stores for its fashion offerings. The analyst added that buying an existing brand may be viewed as easier than the idea of continuing to build one from scratch.

"Wal-Mart is still working on George, but the problem there is not the fashion. The problem is the brand itself. George may have [resonated] with consumers overseas, but it doesn't mean anything in the U.S.," the analyst said.

George, popular in London, is the brand that Wal-Mart acquired when it bought Asda. A fashion contact, whose firm has worked with Wal-Mart on George-branded apparel, observed the name George "sounds good for a men's label, but I'm not sure how many women feel connected to something labeled as George on their clothes. That said, the fashion quality is very good."

George is one of the U.K's largest apparel brands, with sales of more than $1 billion a year in women's, men's and children's apparel and accessories. At one point Asda executives predicted George had the potential to become the world's largest single apparel brand as Wal-Mart rolled it out throughout its global operations.

Another sell-side analyst observed of a possible Wal-Mart/Hilfiger deal: "I know Wal-Mart is looking for a big designer name to counter Target and its designer offerings, such as Isaac Mizrahi, which gives Target its cooler image."

This analyst believed a Wal-Mart/Hilfiger marriage could be good for the retailer, but that it would depend on how the brand was positioned in its stores.

"From a Wal-Mart standpoint, it makes sense. Tommy gives them a huge brand to get its apparel to where they want it to be. However, the double-edged sword for Wal-Mart is how to be like Target and have the cool designers, while living with the everyday low price mantra it keeps pushing," he said.
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