Tommy Hilfiger Corp. has reported a 23.3 percent plunge in third quarter profits as its wholesale business suffered a decline due to reduced department store orders. Furthermore it announced that its sale to Apax Partners is on track, despite the objection of major shareholder Sowood Capital. Sowood, which holds almost 5.8 million of the Hong Kong-based 93.9 million shares outstanding, was not happy with the purchase price.
During a conference call Hilfiger chief executive David Dyer said that the retailer’s directors “unanimously reaffirmed their determination that the Apax transaction is fair and in the best interest of the company and its shareholders.” He added that its banker, JP Morgan Securities, had not been approached a competing bidder since the deal was announced in December last year.
Continuing on the subject, Dyer did say that Tommy Hilfiger himself and some members of European management have “nonexclusive agreements with Apax, which means they would be free to negotiate with competing bidders if one were to emerge.” He also said that Hilfiger could use his 4.3 percent stake to vote for a better offer, should it come along. However, doing this would cost Hilfiger a $50 million break-up fee, payable to Apax.
Income during the quarter ended 31 December dropped to $15.5 million (£8.87 million), from $20.2 million during the same period the year before. Revenue for the quarter fell 7.9 percent to $396.6 million. Hilfiger said results were partially due to a 36.3 percent fall in US wholesale volume to $107.5 million due to reduced department store orders. The company’s exit from its young men’s jeans wholesale business last year accounted for $13.5 million of that reduction.
Dyer said that the retailer had witnessed some retail sales improvements from its US wholesale business, especially in the men’s wear business, but pointed out that the company still needed to work on the women’s wear business. Dyer, who is leaving the firm and will be replaced by Fred Gehring, chief executive of Tommy Hilfiger Europe, said that the “current negative trends (will) carry forward into the fiscal year 2007”.
Meanwhile, international wholesale sales climbed 4.1 percent to $80.6 million, from $77.4 million. Revenue from retail activities rose 12.4 percent to $185.8 million, and same-store sales at US stores rose slightly. Licensing revenues rose 8.4 percent to $20.6 million. Income for the nine month period fell 5.6 percent to $67.7 million, while revenue for the period also dropped 5.8 percent to $1.22 billion.
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