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Updated from 12:00 p.m. EST

Humbled by slow sales,

Tommy Hilfiger


announced a major effort to improve its performance Wednesday that included closing two showcase stores and hiring

Morgan Stanley Dean Witter

to review the strategy of the casual clothing maker and retailer.

Tommy Hilfiger disclosed the plans as another male icon in the fashion business reported quite a different story. Shoe and accessories retailer

Kenneth Cole Productions


announced that it expected a steep increase in quarterly earnings to the mid 50-cent per share range, compared with 30 cents in the year-ago period. Kenneth Cole shares surged 6 3/8, or 19%, to 39 1/2 in afternoon trading. (Kenneth Cole closed up 8 5/8, or 26%, at 41 3/4.)

In a statement that accompanied the release of Tommy Hilfiger's quarterly earnings, which matched previously lowered expectations, the company said Morgan Stanley would review strategic and financial possibilities that would "include, but are not limited to, acquisitions, new business opportunities and repurchase of the company's shares." The company expects Morgan Stanley to complete the study next month.

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In the meantime, Tommy Hilfiger, which is suffering from slowing revenue growth, announced a host of restructuring moves, including closing the high-profile Rodeo Drive and London flagship stores, opening more specialty stores in locations matched to their targeted customers and postponing the launch of a separate dress-up line of women's apparel.

Tommy Hilfiger's share price, which has fallen steadily from a peak of 40 1/16 in August, was up 1 3/8, or 11%, to 13 3/4 in midafternoon trading. (Shares closed up 1 7/16, or 11.6%, at 13 13/16.)

Joe Teklits, an analyst at

Ferris, Baker Watts

, said the changes indicate that the company was serious about improving its performance.

"The store on Rodeo Drive and the one in London have a lot of ego attached with them so shutting them is tough," said Teklits, who rates the company a market perform, the equivalent of a hold. "The message the company is sending is bigger than the cost savings."

Teklits, who does not do any underwriting for Tommy Hilfiger, suggested that the company might also look to make an acquisition that would help it to expand its product lines and/or decrease its reliance on revenues from unreliable department store sales.

The company said preliminary estimates indicate the restructuring will result in fiscal fourth-quarter charges of up to $65 million pretax, or up to 50 cents a diluted share.

For the fourth quarter, Tommy Hilfiger said it expects diluted earnings of between 35 to 45 cents a share, compared with 48 cents in the year ago quarter. For the fiscal year ending March 2001, revenue is expected to grow by 5% to 10% and diluted earnings per share are expected to grow by 10% to 15%.

For its fiscal third quarter, Tommy Hilfiger earned $59.1 million, or 62 cents a diluted share, compared with $57.8 million, or 61 cents a diluted share a year ago.

In January Tommy Hilfiger had warned that earnings would be between 58 and 64 cents a share, well below the previous consensus estimate of 73 cents.

Lower holiday prices and promotions during the holiday season hurt profitability, the company said. Revenue rose a lower-than-expected 12.5% to $521.2 million in the quarter.

The company said its business fundamentals remained strong but that it would be implementing several undisclosed initiatives to improve efficiency, reduce expenses and maintain high operating margins. Details of these moves will be announced over the next few months.