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An Industry Shocker: Wal-Mart Said Eyeing A Tommy Hilfiger Bid

A new player has emerged in the stakes for Tommy Hilfiger Corp. in the form of the world's biggest retailer, Wal-Mart Stores Inc., sources said.

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Tommy Hilfiger Corp. agreed in August to pay $18.1 million to settle an investigation of its commission policies by federal prosecutors in Manhattan. The U.S. Attorney's office agreed not to prosecute the company or its subsidiary.An apparel executive, whose firm sells in the department store channel and who has personal knowledge of the information bankers have presented on Tommy, said, "Selling Tommy at Wal-Mart and exiting the department store channel would be a tremendous boom for apparel firms. Between Tommy Hilfiger and George, Tommy would be the winning card."

George, a label launched in the U.K. and used domestically to target the upscale sensibility of shoppers, has taken longer than expected to catch on in the U.S., another apparel executive said. If Wal-Mart picks up Hilfiger, the retailer could extend the brand into other categories in its product offerings, such as home goods.

Acquiring Hilfiger would fit Wal-Mart's recent merchandise strategy. The retailer's ceo, H. Lee Scott, has said the company can offer varying price points, from entry level to more upscale products. Acquiring Hilfiger would turn up Wal-Mart's fashion quotient and better position the discounter apparel against chief rival Target Corp.

The change in Wal-Mart's merchandising focus is attributed to John Fleming, chief marketing officer, sources said. Fleming was promoted to the post in April, and before that was president and ceo of walmart.com. A standout on Fleming's résumé is a 19-year stint at Target, where he was senior vice president of fashion merchandising.

Wal-Mart chief financial officer Thomas Schoewe said at a Bank of America Investment Conference on Thursday that Fleming has been "building up a team hired to sell ... you're starting to see his impact already."

Some of the focus has been on apparel. The discounter hosted a fashion show in Times Square on Sept. 12, Schoewe noted.

Alan Siegel, a brand consultant and chairman of Siegel & Gale, said carrying designer brands is the "single most important move Target has made to add retailing excitement to [its] image."

As a result of its fashion initiatives, Target has upgraded its customer demographic. And Target's lower price points still appeal to its core customers, while also making it possible for shoppers to participate in the "designer game."

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