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Turnaround Tommy: How Hilfiger's Once-Dead Brand Had Its Biggest Year Ever
In Manhattan’s cavernous Park Avenue Armory the thrum of the Rolling Stones’ “Sympathy for the Devil” blared as Mick Jagger’s 22-year-old supermodel daughter, Georgia, sashayed down the catwalk. Vogue’s Anna Wintour was in the front row. So were the daughters of rock royalty like Keith Richards, Simon Le Bon and Annie Lennox, firing off shots on Instagram (#tommyspring15).

Kendall Jenner of clan Kardashian closed out the show strutting in a sheer, braless dress, driving her 25 million social media followers wild. The message of Tommy Hilfiger’s New York Fashion Week show was as transparent as Jenner’s top: After a long and painful fall, he’s back.

Once the official outfitter of the ’90s hip-hop set, hitting $2 billion in sales in 2000, Hilfiger’s business imploded amid a sea of overexposure and baggy, logoed merchandise that fast fell out of fashion. “We made the mistake of following a trend that was going to be short-lived,” says Hilfiger, 63, “because any trend is short-lived.”

But now the brand is hot once again thanks to a pair of savvy European businessmen: Daniel Grieder, 53, Tommy Hilfiger’s immaculately groomed Swiss CEO, and his Dutch predecessor, Fred Gehring, 60, both former stewards of the Hilfiger brand abroad. And while they’re longtime Tommy loyalists, they’re brutally honest about the mess they inherited.

“It fell off a cliff,” Gehring says of the American part of the business. They bought the company with the help of London-based private equity firm Apax Partners in 2006 for $1.6 billion.

To save Tommy Hilfiger they’re breaking all the rules of modern retail: raising prices, tailoring clothes smaller, alienating customers and cutting off stores. It’s a counterintuitive strategy, but it’s working.

Worldwide revenues hit a record $3.4 billion in 2013, up 7% from the year before (for perspective, sales were $1.8 billion in 2005, during the brand’s slump). Cash flow as defined by earnings before interest and taxes increased 10% to $479 million, with growth not just in the expected emerging markets of Asia and South America but in Europe and North America, too, where competitors like Michael Kors and Hugo Boss Hugo Boss have struggled.

“At first glance you wouldn’t recognize how this brand has come from the depths,” says Brian Sozzi, retail analyst and CEO at Belus Capital Advisors. “They’ve peeled back on distribution. The quality has improved. And I think they’ve broadened out who that Tommy Hilfiger customer is.”
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Tommy Hilfiger drove his eponymous all-American fashion brand into the ground with a glut of cut-rate merchandise. Now a pair of savvy European saviors are bringing it back.
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Harvard endowment portfolio tamps down risk, but limits performance
The most fundamental questions investors face are all about risk. How much should you take? How much can you stomach? It’s literally an acid test.

These are important issues to people managing a few thousand dollars from a kitchen table and portfolio managers directing billions from a corner office. Today, let’s put them to Harvard University.

To state the obvious, Harvard has a lot of dough. The university’s $36.4 billion endowment is the biggest on the planet and it pays for about a third of the school’s operating budget. That’s why Harvard is by far the least expensive university in Greater Boston after factoring in financial assistance (most other local schools, from Boston University to Suffolk University, cost students twice as much on a net basis).

But Harvard has risk issues. Harvard Management Co., the school’s investment arm, has been trying to squeeze risk out of the endowment ever since the fund took a beating in the financial crisis. That sounds like it should be a good thing, but Harvard’s once-stellar investment performance became lackluster year after year while it tried to make the portfolio safer.

The endowment earned 15.4 percent in its most recent fiscal year, which ended June 30. That should put Harvard in the middle of the endowment world but near the bottom of the Ivy Leagues.

Harvard had ranked last among Ivy endowments for five-year performance before the fiscal 2014 numbers were reported, according to Charles Skorina & Co., an executive search firm for institutional money managers. There’s a good chance that Harvard will remain at the bottom when the numbers are updated.

Now compare Harvard with the ultimate vanilla portfolio, which is invested 60 percent in the S&P 500 stock index and 40 percent in a standard bond index (I used the Vanguard Balanced Index Fund as a proxy). Harvard's endowment trailed that auto-pilot fund over one, three, and five years.

Harvard Management was once the envy of the endowment world. Former president Jack Meyer used to hire star managers and pay them performance-based fortunes. That operation became large and expensive, but it grew the endowment from $4.8 billion to $25.8 billion over 15 years.

Mohamed El-Erian succeeded Meyer in 2006. He liked to say Harvard’s biggest investment advantage was the university's infinite time horizon. It could afford to think really long term.

But the financial crisis put a dent in Harvard’s infinite horizon. El-Erian was gone and Jane Mendillo replaced him shortly before the endowment's portfolio took a hard fall. Worse, the university had invested its operating cash account in the essentially cashless endowment portfolio. Harvard was forced to sell assets at the worst possible time to raise money.

Now, years later, what does Harvard think about risk and reward in its investment portfolio? A new top endowment executive, Stephen Blyth, was named last week to succeed Mendillo at the end of the year. He’ll have to figure it out.

There is no right answer to the question. Harvard was once very successful as an aggressive investor and certainly could become one again. But Harvard already has many billions it depends upon in ways other schools can only envy. Limited risk isn’t so bad.

But it’s hard to have it both ways. Everyone who has spent more than a couple of years investing a 401(k) account knows how that works. Harvard is in the same boat with you.

Trial balloon No. 1: Call me a homer, but are the headhunters who are looking for a new president of the Greater Boston Chamber of Commerce going to come up with a better candidate than my former publisher, Chris Mayer? I doubt it. His leadership skills and connection to the city’s business community would be hard to match. Suffolk Construction chief John Fish and Hill Holiday CEO Karen Kaplan are leading a committee looking for a successor to the retiring Paul Guzzi.

Trial balloon No. 2: I’m not sure why he would want the job, but Eastern Bank Corp. president Jan Miller has emerged in Washington as a candidate for an open seat on the Federal Reserve Board of Governors. One of those seats is supposed to be reserved for a community banker. The catch: A current board member, Daniel Tarullo, is considered a New Englander and no region gets more than one seat. Tarullo is both influential and controversial inside the Fed. He has served on the board for five years.
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assistant: The most fundamental questions investors face are all about risk. How much should you take? How much can you stomach? It’s literally an acid test. They are important issues to people managing a few thousand dollars from a kitchen table and portfolio managers directing billions from a corner office. Today, let’s put them to Harvard University.