Just how serious Wal-Mart is about buying clothing designer Tommy Hilfiger is anyone’s guess, with analysts and investors skeptical that a deal would happen.
Just Wal-Mart’s consideration of the popular clothing brand signals that the world’s biggest retailer, best known for low prices, is taking a serious look at high-end fashion.
Wal-Mart Stores Inc. has indicated an interest in exploring the possibility of buying the designer, according to a source familiar with the matter.
Tommy Hilfiger’s shares rose more than 5 percent on Monday morning when news of the interest surfaced, but ended lower as investors appeared to question the likelihood.
Tommy Hilfiger has hired investment bank J.P. Morgan to explore options, including a possible sale, having struggled for months with weakness in its U.S. wholesale business.
But the source cautioned that the Wal-Mart interest was preliminary, and that if an auction ensues for Tommy Hilfiger it would not be for at least a few months.
A long list of potential buyers has formed, which includes private equity firms Apax Partners and Texas Pacific group, and clothing vendors Jones Apparel Group Inc. and Liz Claiborne Inc.
Although analysts said it was unlikely that Wal-Mart would buy Tommy Hilfiger, Wal-Mart has made no secret of its interest in adding more fashion to its stores to combat a slowdown in sales growth.
Wal-Mart’s sales at stores open at least a year — a widely used measure of a retailer’s health — have been growing slower than rival Target Corp.’s in recent quarters, in part because of Target’s success in selling trendy clothing and housewares.
Wal-Mart has already started bringing in more upscale merchandise such as high threadcount sheets, and plans to advertise more aggressively behind its fashionable George apparel line — now the No. 1 clothing brand in Britain.
The retailer made headlines earlier this month when it held its first fashion show at New York Fashion Week, a twice-yearly event when the fashion industry views the latest design collections for the upcoming season. Wal-Mart also took out advertisements in the September issue of fashion magazine Vogue.
“They are clearly trying to make investments in fashion in the apparel space,” Kris Miller, head of consulting firm Bain & Co.’s North American retail practice, said at the Reuters Consumer and Retail Summit in New York Tuesday.
Miller declined to comment on the Tommy Hilfiger speculation, but said Wal-Mart’s George brand shows that it is serious about fashion and could very easily expand into so-called “fast fashion” — getting trendy clothing into stores in a matter of weeks instead of the usual months.
“If Wal-Mart sets its mind on it, I wouldn’t bet against Wal-Mart in this space,” she said.
Roger Farah, president and chief operating officer of Polo Ralph Lauren Corp., said the prospect of Wal-Mart buying rival Tommy Hilfiger was “an interesting idea.”
“What it says to me, if it’s true, is how much product and brand mean,” he said at the Reuters Summit on Monday. “At the end of the day, you can have all the private label you want ... but the customer has an appetite for (name) brands.”