So it came as an abrupt reality check on Wall Street this month when the company made the surprising disclosure that sales weakness in the coming year could chop earnings 40%. Tommy stock drooped like a rapper's baggy jeans, hitting its lowest mark in four years and giving up 30% of its value during one day.
As usual, the Street overreacted. But the plunge raised a question: How does such a hot brand catch the chills overnight? The answer reveals something about Tommy's strategies but also tells a story of the increasingly hostile climate for stand-alone giants like Tommy, Calvin and Ralph.
In part, Tommy may be a victim of its own successes. After a decade in which the company's average growth sizzled at 48% a year, some analysts fear Tommy's recent expansions into women's wear, perfumes and babygear may have pushed the brand to a saturation point. Tommy products are in 10,000 stores nationwide. "They've tried to spin-doctor the brand in a dozen different ways without any big successes," says David Wolfe of the Doneger Group, a fashion consulting firm. Tommy's new upscale women's line has had several stops and starts. Says Wolfe: "It's the same strategic dead end Ralph Lauren faced, which is why he acquired [youth-market retailer] Club Monaco. You can only reinvent yourself in so many ways." Trying to buy its way out of trouble, Tommy stumbled in March when talks to acquire Calvin Klein foundered on licensing deals and Klein's steep $1 billion price tag. Tommy thus passed up a priceless publicity windfall, not to mention the $5 billion a year Klein pulls down at retail. Recent news reports have focused on planned closings of image-burnishing but money-losing Tommy stores in London and Beverly Hills.
Although Tommy continues to make money, it may find growth difficult if it does not acquire a new partner or perhaps get acquired. Women's Wear Daily editorial director Patrick McCarthy says, "In an age of brands, Tommy is still a golden brand. They've got life left in them." On the street there are signs that Tommy is yielding ground to younger brands like Puff Daddy's new Sean John line. Maybe that means the demographic sweet spot of 12-to-19-year-olds that made Tommy king is moving on. When you're not moving up, there's no more dangerous place to be than alone at fashion's pinnacle.