When US Brands go Global

The Breaking Views column in today's WSJ comes up with a startling figure: Tommy Hilfiger (the brand, not the person) is now worth $2.5 billion – even as the value of its US franchise continues to steadily decline.

UK private-equity firm Apax Partners bought Tommy Hilfiger two years ago with $350 million of equity and $1 billion of debt. Since then, it has allowed Hilfiger's US operations to wither and die, while concentrating on the vastly more lucrative European market. As a result, the value of Apax's equity has risen from $350 million to $1.65 billion in those two years: a very impressive rate of return even by private-equity standards.

Brands which are big in their home countries can easily become even bigger abroad, if the owners have the right vision. Just ask Louis Vuitton, or Porsche, or Ikea. But historically such brands have come from Europe, not the US. Hilfiger, I suspect, will be the first of a new wave of US brands which are going to become more successful abroad than they are domestically: call it the inverse of the Apple strategy. But it's worth noting that it took a UK owner to achieve this vision: US owners are still, generally, pretty insular in their outlook, at least by European standards.