Tommy Hilfiger (NYSE:TOM) is slimming down at its employees' expense. The apparel maker announced that it will dismiss 20% of its stateside staff in a move to drive down costs in its troubled domestic-wholesale business.
Fashion is fickle. Textile is hell. Restating the obvious is about as fruitless as donning a Members Only jacket over Vidal Sassoon jeans. Yet hot brands don't necessarily fade away. Decades before Tommy Hilfiger grew to make its mark in preppy clothing, Polo Ralph Lauren (NYSE:RL) was there. The Lauren brand remains attractive, now moving beyond apparel and into home, accessory, and fragrance lines. Hilfiger isn't too far behind, offering everything from branded shower gels to Movado (NYSE:MOV) watches.
So this step back for Hilfiger -- which includes getting rid of its Young Men's jeanswear merchandise -- should be seen more as a retreat than a surrender. The company aims to continue to make headway overseas as well as online, and with the trademarks it acquired from designer Karl Lagerfeld last month.
But the company will have to battle more than just sluggish sales. It is still defending itself against allegations that it was underpaying its taxes by overstating the amount of business it was conducting overseas.
Still, that kind of notoriety isn't likely to cripple the company, just as Martha Stewart Living Omnimedia (NYSE:MSO) seems to be doing just fine with its figurehead incarcerated. A bum quarter won't exactly kill off its prospects, and the layoffs are expected to help the company realize $40 million in annual overhead savings.
In the end, though, nobody knows whether Tommy will, in fact, bounce back. Broken brands litter the streets of branded apparel. After watching its stock fall from a high of $18 back in April to barely $10 today, the company must find it clear that a lot of pessimism has already been priced into the stock.
When's the last time that you wore something by Tommy Hilfiger? Is the brand tired for keeps, or is there still hope? All this and more -- in the What to Wear? discussion board. Only on Fool.com.
Longtime Fool contributor Rick Munarriz is almost grateful that he has two sons who lack fickle fashion sense. He does not own shares in any companies mentioned in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance.
