Stride Rite Corp. may be in danger of losing its lucrative license to create and sell Tommy Hilfiger-branded shoes.
Collective Brands Inc., the new parent company of the Lexington footwear maker, listed the potential loss of the exclusive license as a risk factor in a regulatory filing in December. The license brought in $93 million in sales for Stride Rite in fiscal 2006.
“Whether the license with Tommy Hilfiger will remain in effect depends, in part, on our achieving certain minimum sales levels for the licensed products,” the company said in its quarterly report for the period ending Nov. 3. “We did not meet the minimum sales threshold for the period ended March 31, 2007. There can be no assurance that we will be able to meet such threshold in the future or that the lease will be renewed.”
Stride Rite has created Tommy Hilfiger shoes for the last 10 years under various short-term licenses that have been renewed and extended. In July 2006, the companies extended the agreement through March and then extended it again through Dec. 31, 2008, in this year’s first quarter.
Revenue from the license, which covers shoes for men, women, and children, was deemed as a “significant” portion of Stride Rite’s business in the company’s last quarterly report, filed in July, before it became part of Collective Brands. It realized $20 million in sales from the license in the second quarter and $41 million for the first six months of the year, according to the filing. In June, Stride Rite said second-half sales would be weaker, due in part to the relocation of its product line in a key department store.
Losing the license would affect the larger Collective Brands, which acquired Stride Rite in August, to a lesser extent, but still would be significant.
In July, Tommy Hilfiger Corp. announced it had bought its European footwear licensee, which generated sales of more than $81 million in the five years since the brand was introduced in Europe.
“We believe that there will be strong continued growth in the future and that integration within the Tommy Hilfiger Group will optimize activities both in terms of product development as well as commercially,” Tommy Hilfiger Group president Fred Gehring said in a statement then. “This acquisition is in line with our strategy to consolidate brand management and approach the market in the most coordinated manner possible.”