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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

For the fiscal year ended March 31, 2004.

For the transition period from                      to                     .

Commission file number 1-11226.

TOMMY HILFIGER CORPORATION

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code 852-2216-0668

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨

The aggregate market value of the voting stock held by non-affiliates of the registrant based upon the closing price on September 30, 2003: Ordinary Shares, $0.01 Par Value – $1,034,049,377

The number of shares outstanding of the registrant’s stock as of May 31, 2004: Ordinary Shares, $0.01 Par Value – 91,306,676 shares.

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TABLE OF CONTENTS

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PART I

General

Tommy Hilfiger Corporation (“THC” or the “Company”; unless the context indicates otherwise, all references to the “Company” include THC and its subsidiaries), through its subsidiaries, designs, sources and markets men’s and women’s sportswear, jeanswear and childrenswear under the Tommy Hilfiger trademarks. Through a range of strategic licensing agreements, the Company also offers a broad array of related apparel, accessories, footwear, fragrance and home furnishings. The Company’s products can be found in leading department and specialty stores throughout the United States, Canada, Europe, Mexico, Central and South America, Japan, Hong Kong, Australia and other countries in the Far East, as well as the Company’s own network of specialty and outlet stores in the United States, Canada and Europe. Tommy Hilfiger, the Company’s Honorary Chairman and Principal Designer, provides leadership and direction for the design process. The Company’s apparel is designed to combine classic American styling with unique details and fit to give time-honored basics a fresh and updated look for customers who desire high quality, designer clothes at competitive prices. THC was incorporated as an International Business Company in the British Virgin Islands (the “BVI”) in 1992 and is also registered and licensed as an external International Business Company in Barbados.

As of March 31, 2004, the Company was engaged in three reportable segments: Wholesale, Retail and Licensing. The Wholesale segment consists of the design and sourcing of men’s sportswear and jeanswear, women’s casualwear, junior jeanswear and childrenswear for wholesale distribution. The Retail segment reflects the operations of the Company’s 167 outlet and specialty stores. The Licensing segment consists of the operations of licensing the Company’s trademarks for specified products in specified geographic areas and the operations of the Company’s Far East buying offices. Such products include a broad array of related apparel, accessories, footwear, fragrances and home products.

In the Wholesale segment, products are principally merchandised through the Company’s in-store shop and fixtured area program, whereby participating retailers set aside floor space highlighted by distinctive fixtures dedicated for the exclusive sale of the Company’s products by the retailer. In addition to continuing the in-store shop and fixtured area program, the Company plans to continue broadening its range of product offerings, both in-house and through licensing arrangements, and expanding its channels of distribution.

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Tommy Hilfiger Brands

The Company positions its apparel collections, including products produced under licensing arrangements, under three primary labels: H Hilfiger, Tommy Hilfiger and Tommy.

H Hilfiger

Launched in Spring 2004, the H Hilfiger collections are positioned at the upper end of the better apparel market. Targeted at the 30 to 45 year old consumer, the H Hilfiger lines for men and women are comprised of dressier apparel with work-separates. H is distributed in the U.S. wholesale channel exclusively at Federated Department Stores through Holiday 2004, and is also available in the Company’s specialty stores.

Tommy Hilfiger

The Tommy Hilfiger sportswear and activewear collection for men and women target the 25 to 45 year old consumer. The Tommy Hilfiger lines embrace the “classics with a twist” positioning and feature both casual and tailored apparel. The Tommy Hilfiger collection is sold in department stores and specialty stores worldwide. Additionally, the childrenswear collection, targeted to parents, are distributed under the Tommy Hilfiger label.

Tommy

The Tommy lines target an image and trend conscious consumer between the ages of 15 and 22 years old. The Tommy young men’s jeans collection is a classic denim line comprised of core replenishment styles, complemented by seasonal fashion basics. The Tommy junior jeans collection is fashion forward in styling and fit. Tommy for young men and women are sold in worldwide department stores and specialty stores.

Merchandising Strategies

The Company generally organizes its apparel collections, including products produced under licensing arrangements, into three primary merchandising categories: Core, Core Plus and Fashion.

Wholesale

Core. The Core line is comprised of the Company’s seasonless, or very basic, products all in classic solid colors. Core items are made available for sale by the Company throughout the year and, therefore, generally are kept in stock by the Company. Since Core items are seasonless, they do not have fixed selling periods and, therefore, retailers’ inventories of Core products tend to be maintained throughout the year and reordered as necessary. The Company receives orders from its large customers for Core products on an electronic data interchange (“EDI”) system, which expedites reorders. See “Management Information Systems.”

Core Plus. The Core Plus line is comprised of a broad selection of seasonal “basics” which are derived from Core but offer a greater variety of fabrics, colors and patterns, such as stripes and plaids. The Core Plus line also incorporates certain Fashion products that had previously been successful at retail. The Company sells four different seasonal groups of Core Plus products each year. As compared to Fashion items, Core Plus items provide the retailer with longer selling periods at regular prices. Because Core Plus is a broader product category than Fashion, with a longer regular-price selling period, the Company’s shipping deadlines are more flexible and the Company may be able to place reorders when demand is high.

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Fashion. The Fashion line represents the most updated component of the Company’s product line. Fashion items consist of a group of product classifications coordinated around a seasonal theme. The Company offers Fashion products under at least two themes per season, thereby creating a flow of new merchandise in the marketplace.

Retailing

The Company believes its outlet store business has positioned it to take advantage of an important segment of the retail apparel industry that appeals to customers’ value orientation and provides the Company with an additional channel of distribution. The Company principally stocks its outlet stores with first-quality products manufactured specifically for its outlet stores’ customers and, to a small degree, with out-of-season products. The Company’s outlet stores are located primarily in major outlet centers in the United States, Canada and Europe.

The Company also operates specialty stores in selected locations in the United States, Canada and Europe. The Specialty retail store formats provide the Company a single format in which to showcase the image of the Tommy Hilfiger brand, while featuring a broad array of the Company’s products, including licensed products.

The following is a summary of the Company’s retail stores by type and geographic location as of March 31, 2004:

The above table excludes Tommy Hilfiger stores owned and operated by franchisees, which numbered 208 at March 31, 2004. The Company currently plans to add approximately 25 outlet stores and 6 specialty stores, on a worldwide basis, by March 31, 2005.

Licensing and Distributorships

In connection with the Company’s business strategy of expanding its market penetration through product line and geographic expansion, the Company considers entering into licensing and distribution agreements with respect to certain products and geographic regions if the Company believes such arrangements provide more effective manufacturing, distribution and marketing of such products than could be achieved in-house. The Company continually pursues new opportunities in product categories which are believed to be complementary to its existing product lines, as well as opportunities for geographic expansion through licenses and distributorships to enhance its international presence.

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As shown in the table below, the Company offers numerous products through license arrangements with companies which are among the industry leaders in their respective categories and has several strategic geographic licenses and distributorships:

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In addition to a royalty payment or license fee, all of the Company’s licensees and distributors are required to contribute to the advertisement and promotion of Tommy Hilfiger products on the basis of a percentage of their net sales of Tommy Hilfiger products or a percentage of their net purchases of Tommy Hilfiger products through the Company’s buying offices (depending on the terms of the license or distributorship agreement), generally subject to minimum amounts.

Design

Tommy Hilfiger, the Company’s Honorary Chairman and Principal Designer, provides leadership and direction for the design process. Designers are selected on the basis of their understanding of the retail industry and their ability to understand what consumers desire and which designs are most likely to be commercially viable. Design teams are responsible for separate product classifications. In addition, the Company has senior designers, whose responsibility is to coordinate the design teams. Design teams utilize computer aided design stations, which provide timely translation of designs into sample depictions varying in color, cut and style. The speed of production and breadth of the resulting output assist the Company in selecting desirable designs for the sourcing and research and development staffs to assess.

Research and Development

The Company employs a centralized production department whose primary functions are to identify ways to develop new designs and products more efficiently, and to identify new and more cost-effective sourcing methods. In addition, the production department researches and identifies new sources for both fabrics and manufacturing worldwide in order to control or reduce manufacturing costs while maintaining the Company’s quality standards.

Wholesale Sales and Marketing

Tommy Hilfiger products are sold throughout the United States in major department and specialty retail store locations. The Company’s department store customers include major United States retailers such as Dillard Department Stores, Federated Department Stores (including Macy’s, Rich’s, Bloomingdale’s and Burdines), May Department Stores (including Lord & Taylor, Hecht’s and Foley’s), Belk Stores, Saks, Inc. (including Carson Pirie Scott, Proffitt’s and Younkers) and Marshall Fields (Target Corporation). The Company believes that its relationships with major retailers, including the active sales involvement of the Company’s senior management, are important elements of its marketing strategy.

In Europe and Canada, the Company’s wholesale sales are more broadly distributed, as the customer base is comprised principally of independent specialty retail stores. Further, TH Europe utilizes third party distributors for sales in select countries such as Italy, Portugal, Turkey, Greece, Norway and Israel. In addition, TH Europe has arrangements with third parties that own and operate franchise retail stores in select locations.

An important feature of the Company’s sales and marketing strategy is its in-store shop and fixtured area program, whereby participating retailers set aside floor space highlighted by distinctive fixtures dedicated for exclusive sale of the Company’s products by the retailer. This

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program enables the retailer to create an environment consistent with the Company’s image and to display and stock a greater volume of the Company’s products per square foot of retail space. Such shops and fixtured areas encourage longer-term commitment by the retailer to the Company’s products, including the retailer’s provision of upgraded staffing. These shops and fixtured areas are also believed to increase consumer product recognition and loyalty because of the retail customer’s familiarity with the location of the Company’s products in the store.

The Company’s marketing campaigns are developed and directed principally from its executive offices in New York and Amsterdam. The Company maintains showroom facilities and sales offices in the U.S., Canada and Europe.

The Company employs an extensive staff of merchandise coordinators located throughout the United States. These coordinators educate the department stores’ salespeople about the Company’s current products, provide the Company with first-hand consumer feedback concerning consumer reaction to the Company’s products and coordinate the in-store displays with the department stores. In addition to the coordinator program, the Company also conducts a training program for the department stores’ Tommy Hilfiger selling specialists. The program is designed to educate specialists on the Company’s image and merchandising standards and to promote the development and servicing of clientele. The program also educates specialists in customer assistance and advice, including merchandise selection and the coordination of complete outfits of Tommy Hilfiger products.

The Company sells substantially all its out-of-season products to certain discount retailers. The net revenue from such sales represented less than 15% of the Company’s total net revenue for each of the last three fiscal years.

Advertising, Public Relations and Promotion

The Company believes that advertising to promote and enhance the Tommy Hilfiger brand and the image of Tommy Hilfiger products is important to its long-term growth strategy. All of the Company’s licensees and distributors are required to contribute to the advertisement and promotion of Tommy Hilfiger products a percentage of their net sales of Tommy Hilfiger products or a percentage of their net purchases of Tommy Hilfiger products through the Company’s buying offices (depending on the terms of the license or distributorship agreement), generally subject to minimum amounts. Advertising by the Company, its licensees and most of its distributors is coordinated by the Company and principally appears in magazines, newspapers, and outdoor advertising media. In addition, selected personal appearances by Tommy Hilfiger, corporate sponsorships and charitable programs are utilized to further enhance awareness of the Company’s image and promote the Company’s products. The Company employs an advertising and public relations staff to implement these efforts.

In December 1999, the Company’s website, tommy.com, was launched as a marketing vehicle to complement the ongoing development of the Tommy Hilfiger lifestyle brand. It is designed to strengthen the Company’s relationship with customers, with the added benefit of driving traffic and sales in the Company’s existing retail venues.

Sourcing

The Company’s sourcing strategy is to contract for the manufacture of its products, allowing the Company to maximize production flexibility while avoiding significant capital expenditures, work-in-process inventory buildups and the costs of managing a large

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production work force. The Company inspects products manufactured by contractors to determine whether they meet the Company’s standards. See “Quality Control.”

The Company imports most of its finished goods because it believes it can import higher quality products at lower costs than could be achieved through production in the U.S., Europe and Canada, its major markets. Management maintains extensive and long-term relationships with leading manufacturers principally located in the United States, Mexico and Asia. Production in NAFTA countries (the U.S., Mexico and Canada) amounts to approximately 18% of the cost of products purchased annually. Other than NAFTA countries, no country from which the Company imports accounts for more than 10% of the total cost of products purchased annually. The Company monitors duty, tariff and quota-related developments and geopolitical conditions and continually seeks to minimize its potential exposure to these risks through, among other measures, geographical diversification of its manufacturing sources, the maintenance of its buying offices in Hong Kong, India and the United States, allocation of production to merchandise categories where more quota is available and shifts of production among countries and manufacturers. The Company has also established a Code of Conduct for labor standards and factory conditions in its contract manufacturing facilities. A program to monitor compliance with the Code is administered by an outside law firm. Through the law firm, the Company has been working with a third-party auditor, Verité, an internationally recognized, not-for-profit firm, since 1997. During this time, Verité has audited more than 540 factories in 45 countries where Tommy Hilfiger goods have been produced.

The Company oversees all aspects of apparel manufacturing and production, the negotiation for raw materials and research and development of new products and sources. The Company’s buying offices perform product development, sourcing, production scheduling and quality control functions. In addition, the Company contracts with various buying subagents that perform similar services for the Company and its licensees and geographic distributors, for specified commissions.

The Company has its products manufactured according to plans prepared each year which reflect prior years’ experience, current fashion trends, economic conditions and management estimates of a line’s performance. In certain cases, the Company separately negotiates with suppliers for the purchase of required raw materials by its contractors in accordance with the Company’s specifications. The Company limits its exposure to holding excess inventory by committing to purchase a portion of total projected demand and the Company, in its experience, has been able to satisfy its excess demand through reorders. The Company believes that its policy of limiting its commitments for purchases early in the season reduces its exposure to excess inventory.

Quality Control

The Company’s quality control program is designed to ensure that purchased goods meet the Company’s standards. The Company inspects prototypes of each product prior to cutting by the contractors and performs two in-line inspections and a final inspection prior to shipment. All finished goods are shipped to the Company’s New Jersey facilities for U.S. distribution, its Montreal facility for Canadian distribution, or its Tegelen, The Netherlands facility for European distribution. In the United States, finished goods are re-inspected at the Company’s New Jersey facilities. While the Company’s return policy permits customers to return defective products for credit, less than 1% of the Company’s shipments in fiscal 2004 were returned as defective under this policy.

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Management Information Systems

The Company believes that high levels of automation and technology are essential to maintain its competitive position and the Company continues to invest in computer hardware, systems applications and networks to enhance and to speed the apparel design process, to support the sale and distribution of products to its customers and to improve the integration and efficiency of its operations. The Company utilizes computer-aided design stations for use by the design teams, which provide timely translations of designs into sample depictions varying in color, cut and style. The Company also uses an EDI system to receive on-line orders from its customers and a related electronic method to accumulate sales information on its products. This technology enables the Company to provide valuable sales information and inventory maintenance information services to its customers who have adopted such technology. The Company’s 10 largest customers communicate with the Company through EDI technology. The Company also maintains a business to business website to service its specialty store customers who do not have EDI capability.

Distribution

In the United States, wholesale and retail distribution currently occurs at three major New Jersey facilities (located in Dayton, Cranbury and Secaucus) which average approximately 370,000 square feet. The facilities are operated by the Company and principally staffed by an independent contractor who charges the Company on the basis of the number of items processed, with stipulated hourly fees for special services, authorized overtime, transfers of inventory, etc. The Company maintains its distribution management group and certain administrative functions at its New Jersey facilities.

The Company’s Canadian distribution is processed through a 174,000 square foot facility located in Montreal, Quebec.

TH Europe’s wholesale and retail distribution currently occurs at seven facilities located in Tegelen, The Netherlands totaling approximately 566,000 square feet.

Credit and Collection

The Company owns all of its customer accounts receivable and collects the majority of its receivables from U.S. customers through a credit company subsidiary of a large financial institution pursuant to an agreement whereby the credit company pays the Company after the credit company receives payment from the Company’s customer. The credit company establishes maximum credit limits for each customer account. If the receivable becomes 120 days past due or the customer becomes bankrupt or insolvent, the full amount of the receivable is payable by the credit company. The Company has a similar arrangement with another large financial institution for credit services to its Canadian subsidiary. TH Europe has an agreement with a European credit insurance company from whom it obtains credit insurance on an individual customer basis. In all cases the Company believes that the credit risk associated with such financial institutions is minimal.

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The Company also grants credit directly to certain select customers in the normal course of business without participation by a credit company. In such cases the Company monitors its credit exposure limits to avoid any significant concentration of risk. At March 31, 2004, approximately 75% of the Company’s total receivables were covered by credit insurance, bank guarantees or other means.

Bad debts as a percentage of net sales were less than 0.1% in each of the Company’s last three fiscal years.

Trademarks

The Company owns and utilizes the following principal trademarks: TOMMY HILFIGER^®_, TOMMY JEANS^®_, TOMMY^®_, TOMMY GIRL^®_, HILFIGER ATHLETICS^®_, TH^®_, TOMMY SPORT^®™_, H HILFIGER^™ and TOMMY.COM^®_, the distinctive flag logo, crest design and green eyelet device, and the signature tartan design and Ithaca striping. Tommy Hilfiger Licensing, Inc., a subsidiary of THC (“THLI”), has registered or applied for registration of these and other trademarks for use in the United States and in numerous countries worldwide, including, inter alia, in Canada, Europe, Asia, and South and Central America (collectively, the “Trademarks”). The Company regards the Trademarks and its other proprietary intellectual property rights as valuable assets in the marketing of its products and of the brand. THLI is a party to an agreement with Mr. Hilfiger that restricts, without Mr. Hilfiger’s consent, (i) the sale, lease, license or other conveyance of the Trademarks, (ii) the amendment of the license agreement between THLI and Tommy Hilfiger U.S.A., Inc., a subsidiary of THC (“TH USA”), or (iii) the creation of any lien on the Trademarks, until Mr. Hilfiger’s death or until termination of Mr. Hilfiger’s employment with TH USA without the consent of TH USA.

Backlog

The Company generally receives orders approximately three to five months prior to the time the products are delivered to stores. Thus, at March 31, 2004, the Company’s backlog of orders represents a significant portion of the Company’s expected sales through September 30, 2004. At March 31, 2004, the Company’s backlog of orders, was approximately $679 million, compared to approximately $736 million at March 31, 2003. The Company’s backlog depends upon a number of factors, including the timing of “market weeks” during which a significant percentage of the Company’s orders are received and the timing of shipments. Accordingly, a comparison of backlog from period to period is not necessarily meaningful and may not be indicative of eventual actual shipments or net revenue realized from such shipments. The Company has provided its outlook for fiscal 2005 net revenue in “Management’s Discussion and Analysis of Financial Condition and Results of Operations –Forward Outlook” in Item 7.

Reports

The Company makes available, free of charge through its website, www.tommy.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission.

Employees

At March 31, 2004, the Company had approximately 3,100 full-time employees and 2,300 part-time employees. Virtually all of the Company’s part-time employees were employed

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in the Company’s retail stores. None of the Company’s employees is a member of a union. The Company considers its relations with its employees to be excellent.

Risk Factors

Competition

The apparel industry is highly competitive. The Company competes with numerous domestic and foreign designers, brands and manufacturers of apparel, accessories and other products, some of which may be significantly larger and have greater resources than the Company. Management believes that the Company’s ability to compete effectively depends upon its continued flexibility in responding to market demand and its ability to offer fashion conscious consumers a wide variety of high quality apparel at competitive prices.

Changes in Fashion Trends

The Company believes that its success depends in substantial part on its ability to anticipate, gauge and respond to changing consumer demand and fashion trends in a timely manner. The Company attempts to minimize the risk of changing fashion trends and product acceptance by closely monitoring retail sales trends. However, if fashion trends shift away from the Company’s products, or if the Company otherwise misjudges the market for its product lines, it may be faced with a significant amount of unsold finished goods inventory or other conditions which could have a material adverse effect on the Company.

Uncertainties in Apparel Retailing

The apparel industry historically has been subject to substantial cyclical variations, and a recession in the general economy or uncertainties regarding future economic prospects that affect consumer spending habits could have a material adverse effect on the Company’s results of operations. Under the Company’s current credit and collection arrangements, the bankruptcy of a customer which continued to operate and carry the Company’s products should not have a material adverse effect on the Company. However, financial problems of a retailer could cause the Company’s credit company to limit the amount of receivables of such retailer that the Company may assign to the credit company, which may cause the Company to curtail business with such retailer or require the Company to assume more credit risk relating to such customer’s receivables.

Dependence on Customers Under Common Control

The Company’s department store customers include major United States retailers, certain of which are under common ownership. When considered together as a group under common ownership, sales to the department store customers which were owned by Dillard Department Stores, Federated Department Stores and May Department Stores accounted for approximately 10%, 9% and 8%, respectively, of the Company’s fiscal 2004 consolidated net revenue. The Company expects, based on its Forward Outlook, that each of these customers will account for less than 10% of fiscal 2005 consolidated net revenue. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward Outlook” in Item 7. A decision by the controlling owner of a group of department stores to decrease the amount purchased from the Company or to cease carrying the Company’s products could have a material adverse effect on the Company.

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Sourcing

The Company does not own or operate any manufacturing facilities and is therefore dependent upon third parties for the manufacture of all of its products. The inability of a manufacturer to ship orders of the Company’s products in a timely manner, including as a result of local financial market disruption which could impair the ability of such suppliers to finance their operations, or to meet quality standards, could cause the Company to miss the delivery date requirements of its customers for those items, which could result in cancellation of orders, refusal to accept deliveries or a reduction in purchase prices, any of which could have a material adverse effect on the Company’s financial condition and results of operations. In addition, travel restrictions arising due to health concerns or other factors could limit the Company’s ability to select and monitor its suppliers, which could have an adverse effect on the Company’s quality standards and ability to meet customer orders. The Company has no long-term formal arrangements with any of its suppliers and historically has experienced only limited difficulty in satisfying its raw material and finished goods requirements. Although the Company believes it could replace such suppliers without a material adverse effect on the Company, there can be no assurance that such suppliers could be replaced in a timely manner, and the loss of such suppliers could have a material adverse effect on the Company’s short-term operating results.

Tax Matters

THC was incorporated in 1992 as an International Business Company in the BVI and is also registered and licensed as an external International Business Company in Barbados, where it has established residency for tax purposes. In addition, certain of THC’s non-United States subsidiaries are incorporated in the BVI and other countries and are subject to taxation in those or other countries where the applicable statutory tax rates are substantially lower than those applicable to the Company’s United States subsidiaries. As a result, the Company’s overall effective tax rate is materially effected by the relative level of earnings in the various taxing jurisdictions to which the Company’s earnings are subject.

As a tax resident of Barbados, THC is entitled to the benefits of an income tax treaty between Barbados and the United States. The Company has in the past and continues to conduct its operations in a manner that it believes is in full compliance with the requirements of the treaty, as well as other applicable tax laws. Nevertheless, recent legislative proposals in the United States have focused on the taxation of United States subsidiaries of non-United States corporations. Changes in tax rules incorporated in treaties, the Internal Revenue Code, regulations or other authorities may occur which could materially increase the Company’s tax payments and reduce its net income and cash flow.

The Company and its subsidiaries are, from time to time, subject to tax examinations by taxing authorities of the various jurisdictions in which the Company operates. Such examinations could result in assessments by such taxing authorities. The Company’s management does not expect the resolution of these matters to have a material effect on its financial position, results of operations or cash flows.

The Company’s effective tax rate has been and is expected to continue to be a major factor in the determination of the Company’s profitability and cash flow. As such, a significant shift in the relative sources of the Company’s earnings, or changes in tax treaties, laws, rules or interpretations, could have a material adverse effect on the Company’s results of operations and cash flow.

International Operations

The Company’s ability to conduct business and capitalize on growth opportunities in international markets is subject to risks associated with international operations, including the burdens of complying with a variety of foreign laws and regulations, unexpected changes in regulatory requirements and new tariffs, taxes or other barriers to some international markets.

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The Company is also subject to general political and economic risks in connection with the Company’s international operations, including political instability, changes in diplomatic and trade relationships and general economic or currency fluctuations in specific countries or markets.

The Company cannot predict whether quotas, duties, taxes or other similar restrictions will be imposed by the United States, the European Union or other countries upon the import or export of the Company’s products in the future, or the effect any of these actions would have on the Company’s business, financial condition or results of operations. Changes in regulatory, geopolitical policies and other factors may adversely affect the Company’s business in the future or may require the Company to modify our current business practices.

Impact of Potential Future Acquisitions

From time to time, the Company has pursued acquisitions. For example, during the fiscal year ended March 31, 2002, the Company acquired TH Europe for a purchase price of $200,000,000 plus acquisition related costs of $6,789,000 and assumed debt of $42,629,000, funded using available cash. The Company also plans to seek additional acquisitions to further diversify its revenue and earnings base. If one or more acquisitions results in the Company becoming substantially more leveraged on a consolidated basis, the Company’s flexibility in responding to changes in economic, business or market conditions may be adversely affected. The Company’s pursuit of acquisitions may be constrained by Mr. Hilfiger’s employment agreement with the Company, which provides in part that TH USA and its subsidiaries cannot enter into any line of business without the consent of Mr. Hilfiger if he shall reasonably determine that such line of business would be detrimental to the Tommy Hilfiger trademarks.

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The principal executive offices of THC are located at 9/F, Novel Industrial Building, 850-870 Lai Chi Kok Road, Cheung Sha Wan, Kowloon, Hong Kong. TH USA’s principal executive offices are located at 25 West 39^th Street, New York, New York 10018.

The general location, use, ownership status and approximate size of the principal properties which the Company currently occupies are set forth below:

A table summarizing the Company’s retail stores, all of which are leased, by type and geographic location as of March 31, 2004 is presented under “Business – Merchandising Strategies – Retailing” in Item 1. The Company’s outlet and specialty stores average approximately 5,600 square feet.

The Company and its subsidiaries are from time to time involved in routine legal matters incidental to their businesses. In the opinion of the Company’s management, based on advice of counsel, the resolution of these matters will not have a material effect on its financial position, its results of operations or its cash flows.

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Not applicable

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PART II

THC’s Ordinary Shares, par value $0.01 per share (the “Ordinary Shares”), are listed and traded on the New York Stock Exchange under the symbol “TOM.” As of May 31, 2004, there were approximately 1,500 record holders of the outstanding Ordinary Shares.

The following table sets forth, for each of the periods indicated, the high and low sales prices per Ordinary Share as reported on the New York Stock Exchange Composite Tape.

THC has not paid any cash dividends since its IPO in 1992, and has no current plans to pay cash dividends. Future dividend policy will depend on the Company’s earnings, capital requirements, financial condition, restrictions imposed by agreements governing indebtedness of THC and its subsidiaries, availability of dividends from subsidiaries, receipt of funds in connection with repayment of loans to subsidiaries or advances from operating subsidiaries, tax laws and other factors considered relevant by the Board of Directors of THC. During the fourth quarter of the fiscal year covered by this report, the Company did not repurchase any of its Ordinary Shares. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” in Item 7 for a description of certain restrictions on the ability of subsidiaries of THC to pay dividends.

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Equity Compensation Plan Information

The following table sets forth information regarding the Company’s equity compensation plans as of March 31, 2004.

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Selected Consolidated Financial Data

The following selected financial data have been derived from the Company’s Consolidated Financial Statements. The information should be read in conjunction with the Consolidated Financial Statements and related Notes thereto that appear elsewhere in this Annual Report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7.

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(dollar amounts in thousands, except per share data)

General

The following discussion and analysis should be read in conjunction with the Company’s Consolidated Financial Statements and related notes thereto in Item 8. All references to years relate to the fiscal year ended March 31 of such year.

Results of Operations

The following table sets forth the Consolidated Statements of Operations data as a percentage of net revenue.

Special Items Affecting Comparability

Fiscal year 2004 included net special charges related to (a) the closure of four specialty retail stores, (b) the repositioning of the U.S. Young Men’s Jeans business in March 2004, (c) the acceleration of depreciation of certain in-store shops within U.S. department stores as part of the Company’s strategy to reduce overdistribution, (d) other cost reduction initiatives and (e) the settlement of a trademark counterfeiting and infringement litigation against Goody’s Family Clothing, Inc. These net special charges, which totaled $6,776 before taxes, or $0.05 per share, included $3,482 for lease buyouts, $720 for the write-down of retail store inventory (included in cost of goods sold), $6,083 in severance provisions, $4,330 for the accelerated depreciation of in-store shops, including certain shops in the Young Men’s Jeans division, $3,161 for the impairment of stores in the Retail segment were offset by an $11,000 settlement received from Goody’s Family Clothing, Inc.

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In fiscal 2003, the Company recorded special charges of $78,186 before taxes related to the closure of all but seven of its U.S. specialty stores and the impairment of fixed assets of the seven U.S. specialty stores that the Company continued to operate. The special charges consisted of $38,929 for the impairment of leasehold improvements, store fixtures and other assets of stores that were closed, $24,263 for estimated lease termination costs, $2,600 for the write down of inventory (included in cost of goods sold), $764 for other expenses, including employee costs, and $11,630 for an impairment charge to write down to fair value the fixed assets and leasehold improvements at the seven stores that remained open.

On April 1, 2002, the Company adopted Financial Accounting Standards Board Statement No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). SFAS 142 requires that goodwill, including previously existing goodwill, and intangible assets with indefinite useful lives not be amortized but that they be tested for impairment at adoption and at least annually thereafter. The Company performed its initial test upon adoption and performs its annual impairment review during the fourth quarter of each fiscal year.

Upon adoption of SFAS 142 in the first quarter of fiscal 2003, the Company recorded a non-cash, non-operating charge of $430,026, to reduce the carrying value of its goodwill to fair value. Such charge is reflected as a cumulative effect of a change in accounting principle in the Consolidated Statements of Operations.

The Company performed its first annual impairment review of goodwill and intangible assets under SFAS 142 during the fourth quarter of fiscal 2003. As a result of this review, the Company recorded a non-cash charge of $150,612 in operating expenses for the impairment of goodwill, principally in its U.S. wholesale component. These charges had no effect on the Company’s credit facilities, financial covenants or cash flows.

Prior to April 1, 2002, the Company recorded deferred tax liabilities relating to the difference in the book and tax basis of intangible assets, principally trademark rights. As a result of adopting SFAS 142, those deferred tax liabilities will no longer be used to support the realization of certain deferred tax assets. Accordingly, the Company recorded a one-time, non-cash, deferred tax charge totaling $11,358, in order to establish a valuation allowance against those deferred tax assets. This charge was included in the Company’s provision for income taxes for the first quarter of fiscal 2003.

On July 5, 2001, the Company acquired TH Europe, its European licensee, for a purchase price of $200,000 plus acquisition-related costs of $6,789 and assumed debt of $42,629 (the “TH Europe Acquisition”). The TH Europe Acquisition was funded using available cash. The business of TH Europe includes both wholesale distribution as well as the operation of retail stores. The operating results of TH Europe are included in the consolidated results of the Company from the date of the acquisition. In addition, the TH Europe Acquisition results in a reduction in the Company’s Licensing segment revenue as the Company’s royalties from TH Europe are eliminated in consolidation subsequent to the acquisition.

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The Company has a number of business relationships with related parties. For more information with respect to these transactions, see Note 12 to the Consolidated Financial Statements in Item 8 and Item 13, “Certain Relationships and Related Transactions.”

Overview

The Company reported net revenue of $1,875,797 in fiscal 2004, slightly lower than fiscal 2003 net revenue of $1,888,055. Consolidated net revenue included revenue from TH Europe of approximately $412,641 in fiscal 2004 and $275,769 in fiscal 2003. This increase from the prior year included approximately $58,898 resulting from the translation of the stronger Euro in fiscal 2004. Fiscal 2003 net revenue increased slightly from fiscal 2002 net revenue of $1,876,721. The decrease in net revenue from fiscal 2003 to fiscal 2004 was due to a decrease in net revenue of the Wholesale segment offset, in part, by an increase in net revenue of the Retail segment. Within the Wholesale segment, a decline in net revenue in the childrenswear component was partially offset by increases in net revenue in the menswear and womenswear components driven by growth in TH Europe. Within the Retail segment, as further described below, net revenue from stores opened since March 31, 2003 was offset, partially, by a decrease in net revenue due to the closing of the 37 U.S. specialty stores mentioned above and declining sales in existing stores in the Company’s U.S. outlet division. Licensing segment net revenue in fiscal 2004 remained essentially unchanged compared to fiscal 2003 as higher royalty income on various licensed products, as well as international licenses, offset the loss of royalty revenue associated with the men’s underwear business which was taken in-house on June 1, 2003. The fluctuations in net revenue in each of these segments were primarily volume related and are further described below in the Segment Operations section. The increase in fiscal 2003 over fiscal 2002 was due to an increase in net revenue of the Retail and Licensing segments, offset, in part, by a decrease in the Wholesale segment net revenue. Net revenue by segment (after elimination of intersegment revenue) was as follows:

Gross profit as a percentage of net revenue increased to 46.0% in fiscal 2004 from 43.9% in fiscal 2003. The improvement in gross margin was mainly due to an improvement in the gross margin of the Company’s Wholesale segment. Gross margin in the Wholesale segment benefited from improved gross margins of, and a higher contribution from, TH Europe in fiscal 2004 as compared to fiscal 2003. TH Europe generates a higher gross margin than the Company’s domestic components. During fiscal 2004, the U.S. wholesale division continued its efforts to bring supply and demand into balance. As part of this process, the Company reevaluated the level of price adjustments it previously provided for its retailers and reduced its estimated accrual for such price adjustments, increasing gross profit by approximately $9,000 during the first quarter of fiscal 2004. Partially offsetting these improvements was a slightly lower gross margin in the Retail segment, reflecting higher markdowns in the United States, compared to last year. The Company’s gross margins may not be directly comparable to those of its competitors, as income statement classifications of certain expenses may vary by company.

Gross profit as a percentage of net revenue increased to 43.9% in fiscal 2003 from 42.8% in fiscal 2002. The improvement was due to an improvement in the gross margin of the Company’s Wholesale segment, due to a higher contribution of TH Europe in fiscal 2003, as compared to fiscal 2002, as well as a higher contribution of the Retail segment, which generates a

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higher gross margin than the Company’s consolidated gross margin, to total net revenue.

Operating expenses decreased to $665,865, or 35.5% of net revenue, in fiscal 2004 from $858,875 or 45.4% of net revenue, in fiscal 2003. Operating expenses in each year were affected by special items. Special items recorded in fiscal 2004 totaled $6,056, all of which are described above. Fiscal 2003 results included the impairment of goodwill of $150,612 along with a charge of $75,586 related to the closure of specialty stores. Excluding these special items, operating expenses increased to $659,809, or 35.2% of net revenue, in fiscal 2004 compared to $632,677, or 33.5% of net revenue, in fiscal 2003. The Company believes that results before special items provide a more meaningful comparison of the Company’s ongoing operating expenses. The overall increase in selling, general and administrative expenses, as well as the increase as a percentage of net revenue is due to increased expenses of the Wholesale segment partially offset by a decrease in the Company’s Retail segment. The increase in the Wholesale segment operating expenses was mainly due to the increased expenses in the Europe wholesale division incurred to support its growth and from the translation of the stronger Euro in fiscal 2004, partially offset by reduced expenses in the U.S. wholesale division. The decrease in the Retail segment operating expenses was primarily due to closing 37 U.S. specialty stores since March 31, 2003 offset, in part, by increased expenses in the Company’s U.S. outlet, European and Canadian retail divisions incurred to support growth and, in the case of the European subsidiary, from the translation of the stronger Euro in fiscal 2004.

Operating expenses increased to $858,875, or 45.4% of net revenue, in fiscal 2003 from $617,903, or 32.9% of net revenue, in fiscal 2002. This increase was principally due to the impairment of goodwill of $150,612 recorded in fiscal 2003 and the special items recorded in operating expenses of $75,586 related to the closure of the specialty stores, both of which are described above. Excluding these special items, operating expenses increased to $632,677, or 33.5% of net revenue, in fiscal 2003 compared to $617,903, or 32.9% of net revenue, in fiscal 2002. Also contributing to the increase was an increase in operating expenses of the Wholesale segment due to the increased expenses in the Europe wholesale division incurred to support its growth and its operations for the entire fiscal year as compared to nine months in fiscal 2002, and the Retail segment, partially offset by a decrease in the Company’s corporate division operating expenses, as well as the elimination of goodwill and indefinite lived intangible asset amortization of $32,588.

Interest and other expense decreased from $46,976 in fiscal 2003 to $31,756 in fiscal 2004, after increasing from $41,177 in fiscal 2002. The decrease in fiscal 2004 was primarily due to the repayment, upon maturity, in June 2003, of $151,091 principal amount of the 6.50% notes which matured on June 1, 2003 (the “2003 Notes”) and a lower average level of debt in fiscal 2004 as compared to fiscal 2003. The increase in fiscal 2003 was due to interest expense associated with the issuance of $150,000 principal amount of 9% Senior Bonds due December 1, 2031 (the “2031 Bonds”). The 2031 Bonds were issued on December 3, 2001 and were outstanding for the entire fiscal year 2003 as opposed to four months in fiscal year 2002, partially offset by the lower interest expense due to the repurchase, prior to maturity, of $98,909 principal amount of the 2003 Notes.

Interest income decreased from $6,717 in fiscal 2003 to $3,577 in fiscal 2004, after decreasing from $10,062 in fiscal 2002. The decrease in fiscal 2004 was due to lower interest rates earned on invested cash balances and lower average cash balances following the repayment

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of the 2003 Notes. The decrease in fiscal 2003 was due to lower interest rates earned on invested cash balances partially offset by higher average cash balances.

In fiscal 2004, the Company recorded a provision for income taxes of $37,445 on income before taxes of $169,597 compared to a provision for income taxes of $14,144 against a loss before taxes and the cumulative effect of a change in accounting principle of $69,435 in fiscal 2003. The provision in fiscal 2003 reflects the deferred tax charge related to the adoption of SFAS 142, the non-deductibility of the goodwill impairment and the tax benefit related to the special items recorded in fiscal 2003.

The provision for income taxes, before special items, for fiscal 2004 increased to 22.3% of income before taxes from 18.9% last year. The Company believes that results before special items provide a more meaningful comparison of the Company’s effective tax rate, particularly because of the loss before income taxes reported in fiscal 2003. The provision for taxes increased from 13.0% in fiscal 2002 to 18.9% in fiscal 2003. The effective tax rate for all periods is primarily attributable to the relative level of earnings in the various taxing jurisdictions to which the Company’s earnings are subject as well as changes in tax laws affecting the Company’s operations.

Segment Operations

The Company has three reportable segments: Wholesale, Retail and Licensing. The Company’s reportable segments are business units that offer different products and services or similar products through different distribution channels. The Wholesale segment consists of the design and sourcing of men’s sportswear and jeanswear, women’s casualwear and jeanswear and childrenswear for wholesale distribution. The Retail segment reflects the operations of the Company’s outlet and specialty stores. The Licensing segment consists of the operations of licensing the Company’s trademarks for specified products in specified geographic areas and the operations of the Company’s Far East buying offices. The Company evaluates performance and allocates resources based on segment profits. Segment profits are comprised of segment net revenue less cost of goods sold and selling, general and administrative expenses. Excluded from the calculation of segment profits, however, are the vast majority of executive compensation, certain marketing costs, amortization of intangibles (including goodwill through March 31, 2002), special items, interest costs, other corporate overhead, the provision for income taxes and the cumulative effect of a change in accounting principle. Financial information for the Company’s reportable segments is as follows (see Note 11 to the Consolidated Financial Statements in Item 8 for a reconciliation of total segment revenue to consolidated net revenue):

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Wholesale Segment

Wholesale segment net revenue decreased by $32,663, or 2.3%, from fiscal 2003 to fiscal 2004 and by $20,655, or 1.4%, from fiscal 2002 to fiscal 2003. Within the Wholesale segment, net revenue by component was as follows:

Net revenue in the Wholesale segment decreased due to a reduction in net revenue of $153,759 in the U.S. caused by lower average unit prices and lower volume during fiscal 2004 as compared to the prior year. The lower average unit prices accounted for approximately 65% of the decrease while lower volume accounted for the remaining 35% of the decrease. The lower average unit prices were driven by a change in the mix between the Company’s normal off-price channels and major U.S. department store customers. Also, the mens underwear division which was brought in-house in fiscal 2004, has a lower average unit price than the overall U.S. wholesale component. Partially offsetting this decrease was an increase of $114,250 in net revenue of TH Europe, which benefited from growth in each of its components, particularly menswear and womenswear, and the effect of currency translation. The decline in Wholesale net revenue from fiscal 2002 to fiscal 2003 was due to an overall volume reduction in the United States, particularly in the menswear component, partially offset by growth in TH Europe and the inclusion of twelve months of TH Europe’s results, versus nine months in fiscal 2002.

Wholesale segment profits increased by $22,440, or 19.1%, from fiscal 2003 to fiscal 2004 and decreased by $21,715, or 15.6%, from fiscal 2002 to fiscal 2003. As a percentage of segment revenue, Wholesale segment profits were 10.1%, 8.3% and 9.7% for fiscal years 2004, 2003 and 2002, respectively. Wholesale segment profits increased in fiscal 2004 due to the increase in TH Europe net revenue, mentioned above, as a percentage of total segment revenue. The TH Europe wholesale business generates a higher operating margin than the segment’s domestic component. In addition, the segment benefited from lower operating expenses in the U.S. due to cost savings plans implemented at the beginning of fiscal 2004. The decrease in Wholesale segment profits and segment profits as a percentage of net revenue from fiscal 2002 to fiscal 2003 was mainly due to a decrease in operating profit in the U.S., partially offset by an increase in operating profit in TH Europe’s wholesale division.

Retail Segment

Retail segment net revenue increased $20,645, or 5.1%, from fiscal 2003 to fiscal 2004 and $25,318, or 6.7%, from fiscal 2002 to fiscal 2003. The improvement in the current year was due to net revenue from stores opened since March 31, 2003, partially offset by the closing of 37 U.S. specialty stores between January and April 2003 and declining sales at existing stores in the Company’s U.S. outlet division during fiscal 2004. Retail stores opened since March 31, 2003 contributed net revenue of $41,439 during fiscal 2004, consisting of $20,671 of revenue in the

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U.S. and $20,768 of non-U.S. revenue. Revenue generated from the 37 U.S. specialty retail stores that were closed amounted to $657 and $31,084 during fiscal 2004 and fiscal 2003, respectively. The improvement from fiscal 2002 to fiscal 2003 was due to an increase in the number of stores and the expansion of certain stores into larger formats offset, in part, by decreases in sales at existing stores. The Company operated 167, 166 and 163 retail stores as of March 31, 2004, 2003 and 2002, respectively.

Retail segment profits increased $2,012, or 6.9%, from fiscal 2003 to fiscal 2004 and decreased $21,179, or 42.0%, from fiscal 2002 to fiscal 2003. As a percentage of segment revenue, Retail segment profits were 7.4%, 7.2% and 13.3% for fiscal years 2004, 2003 and 2002, respectively. In the U.S., operating profits and operating margin increased from fiscal 2003 to fiscal 2004 due to reduced operating losses in the Company’s U.S. specialty retail division following the store closings mentioned above. These stores generated operating losses of $945 and $16,754 in fiscal 2004 and 2003, respectively. Partially offsetting this reduction in losses was a decrease in operating profits in the U.S. outlet division resulting from higher markdowns experienced during fiscal 2004 as compared to fiscal 2003. Outside the U.S., operating profits and operating margin decreased due to higher operating expenses in Europe and Canada as those divisions expand their retail businesses. Segment profits and segment profits as a percentage of segment revenue decreased from fiscal 2002 to fiscal 2003 principally due to operating losses in the Company’s U.S. specialty retail division. During fiscal years 2003 and 2002, these stores generated operating losses of $16,754 and $7,016, respectively.

Licensing Segment

Licensing segment revenue decreased by $3,278, or 2.6%, from fiscal 2003 to fiscal 2004 after increasing by $12,867, or 11.7%, from fiscal 2002 to fiscal 2003. The decrease in segment revenue in fiscal 2004 was mainly due to a reduction in buying agency commissions from consolidated subsidiaries partially offset by higher royalties earned from third-party licensees. Higher royalties earned from third-party licensees included, the Company’s geographic license in Japan, licenses for tailored clothing and footwear in Europe and watches, partially offset by the loss of royalties associated with the mens underwear business which was taken in-house on June 1, 2003. New products introduced under licenses entered into during fiscal 2004 and 2003 contributed a de minimus amount of revenue during those years. The increase in segment revenue in fiscal 2003 was mainly due to higher licensing royalties and an increase in revenue from the Company’s Far East buying offices.

Licensing segment profits increased by $1,683, or 2.1%, and segment profit percentage increased from fiscal 2003 to fiscal 2004 due to reduced operating expenses at the Company’s Far East buying offices and the increase in royalty revenue discussed above, partially offset by a reduction in buying agency commissions from consolidated subsidiaries. Segment profit increased $15,502, or 24.0%, from fiscal 2002 to fiscal 2003 due to the increase in licensing royalties mentioned above and a reduction of operating expenses at the Company’s Far East buying offices.

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Forward Outlook

The Company expects consolidated revenue for fiscal 2005 to be below that of fiscal 2004 in the high single digit percentage range.

In the wholesale segment, the Company currently anticipates revenue contraction in fiscal 2005 in the mid-teen percentage range, reflecting contraction in the United States by approximately 25% when compared to fiscal 2004, partially offset by double digit growth in Europe. Within the wholesale segment, menswear is expected to decline in the high-teen percentage range for full year fiscal 2005 from $571,678 in fiscal 2004. Womenswear is expected to decline in the mid-single digit percentage range from $572,198 in fiscal 2004, due principally to market factors affecting the U.S. Juniors Jeans division. Childrenswear is expected to decline by approximately 40% from $243,694 in fiscal 2004, due entirely to declines in U.S. orders.

Revenue in the Company’s Retail segment is expected to grow in the mid-teen percentage range in fiscal 2005 from $425,744 in fiscal 2004, mainly due to revenue from new store openings in Europe, Canada and the U.S. The Company anticipates opening approximately 25 outlet stores and approximately six specialty stores worldwide in fiscal 2005.

Licensing segment revenue is projected to be comparable to the $62,483 reported for fiscal 2004, with higher international royalties and commissions offsetting lower royalty income from U.S. licenses.

The Company expects full year fiscal 2005 earnings per share, excluding the effects of special charges, to be at the low end of its previously disclosed estimate for a decline in the high-single to mid-teen percentage range, when compared to fiscal 2004 results, also before the effects of special charges.

For the quarter ending June 30, 2004, the Company now anticipates a loss in the range of $0.10 to $0.13 per share, reflecting the seasonally low shipping patterns in Europe, the higher anticipated reduction in U.S. wholesale revenue and lower leverage from the Company’s expense base.

The Company reiterated its plans in fiscal 2005 to continue to control working capital in relation to expected revenue. Capital expenditures are expected to be approximately $70,000. The Company’s effective tax rate for fiscal 2005 before special items is expected to be approximately 20%. The Company projects weighted average shares outstanding to be approximately 92,000,000 for the year.

Liquidity and Capital Resources

Cash provided by operations continues to be the Company’s primary source of funds to finance operating needs, capital expenditures and debt service. Capital expenditures primarily relate to construction of additional retail stores and maintenance or selective expansion of the Company’s in-store shop and fixtured area program, as well as improvements in facilities and information systems. The Company’s sources of liquidity are cash on hand, cash from operations and the Company’s available credit.

The Company’s cash and cash equivalents balance decreased from $420,826 at March 31, 2003 to $414,548 at March 31, 2004. In fiscal 2004, the Company generated net cash from operating activities of $241,857, consisting of $215,665 of net income adjusted for non-cash items, and $26,192 of cash provided by changes in working capital, primarily a reduction in

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inventory partially offset by a decrease in accounts payable. During fiscal 2004, cash used in investing activities related to capital expenditures of $56,732, which were made principally in support of the expansion of the European business as well as the Company’s retail store openings, and the purchase of short-term investments of $27,596. During fiscal 2004, cash used in financing activities primarily related to the repayment of $151,091 principal amount of the 2003 Notes and the repayment of the short-term borrowings under TH Europe’s credit facility, partially offset by proceeds from the issuance of Ordinary Shares under the Company’s employee stock option program. A more detailed analysis of the changes in cash equivalents is presented in the Consolidated Statements of Cash Flows.

As of March 31, 2004, the Company’s principal debt facilities consisted of $200,000 of 6.85% notes maturing on June 1, 2008 (the “2008 Notes”), the 2031 Bonds and a $300,000 revolving credit facility (the “Credit Facility”). The 2008 Notes and the 2031 Bonds (collectively, the “Notes”) were issued by TH USA and are fully and unconditionally guaranteed by THC. The indenture under which the Notes were issued contains covenants that, among other things, restrict the ability of subsidiaries of THC to incur additional indebtedness, restrict the ability of THC and its subsidiaries to incur indebtedness secured by liens or enter into sale and leaseback transactions and restrict the ability of THC and TH USA to engage in mergers or consolidations.

The Credit Facility, which is guaranteed by THC, consists of an unsecured $300,000 TH USA three-year revolving credit facility, expiring on July 1, 2005, of which up to $175,000 may be used for direct borrowings. The Credit Facility is available for letters of credit, working capital and other general corporate purposes. As of March 31, 2004, there were no direct borrowings outstanding under the Credit Facility and $116,160 of the available borrowings under the Credit Facility had been used to open letters of credit, including $29,825 for inventory purchased that is included in current liabilities and $86,335 related to commitments to purchase inventory.

The Credit Facility contains a number of covenants that, among other things, restrict the ability of subsidiaries of THC to dispose of assets, incur additional indebtedness, create liens on assets, pay dividends or make other payments in respect of capital stock, make investments, loans and advances, engage in transactions with affiliates, enter into certain sale and leaseback transactions, engage in mergers or consolidations or change the businesses conducted by them. The Credit Facility also restricts the ability of THC to create liens on assets or enter into sale and leaseback transactions. Under the Credit Facility, subsidiaries of THC may not pay dividends or make other payments in respect of capital stock to THC that in the aggregate exceed 33% of the Company’s cumulative consolidated net income, commencing with the fiscal year ended March 31, 2002 plus $125,000, less certain deductions. In addition, under the Credit Facility, THC and TH USA are required to comply with and maintain specified financial ratios and meet certain tests (based on the Company’s consolidated financial results excluding the effects of changes in accounting principles generally accepted in the United States), including, without limitation, a minimum fixed charge coverage ratio, a maximum leverage ratio and a minimum consolidated net worth test.

The Company was in compliance with all covenants in respect of the Notes and the Credit Facility as of March 31, 2004.

Certain of the Company’s non-U.S. subsidiaries have separate credit facilities, totaling approximately $150,000 at March 31, 2004, for working capital or trade financing purposes. As of March 31, 2004, $9,285 of available borrowings under these facilities had been used to open letters of credit, including $2,052 for inventory purchased that is included in current liabilities and

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$7,233 related to commitments to purchase inventory and bank guarantees of $3,086. There were no short-term borrowings as of March 31, 2004 under these facilities. Borrowings under these credit facilities bear interest at variable rates which, on a weighted average annual basis, amounted to 3.26% for the fiscal year ended, March 31, 2004.

The Company’s credit facilities provide for the issuance of letters of credit without restriction on cash balances.

The Company attempts to mitigate the risks associated with adverse movements in interest rates by establishing and maintaining a favorable balance of fixed and floating rate debt and cash on hand. Management also believes that significant flexibility remains available in the form of additional borrowing capacity and the ability to prepay long-term debt, if so desired, in response to changing conditions in the debt markets. Because such flexibility exists, the Company does not normally enter into specific hedging transactions to further mitigate interest rate risks, except in the case of specific, material borrowing transactions. No interest rate hedging contracts were in place as of March 31, 2004.

The Company intends to fund its cash requirements for current operations for fiscal 2005 and the foreseeable future from available cash balances, internally generated funds and borrowings available under the Credit Facility or similar replacement facilities. The Company believes that these resources will be sufficient to fund its cash requirements for such periods.

As of March 31, 2004, the Company’s contractual cash obligations by future period were as follows:

There were no significant committed capital expenditures at March 31, 2004. The Company expects fiscal 2005 capital expenditures to approximate $70,000.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements within the meaning of SEC Regulation S-K Item 303(a)(4).

Application of Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenue and expenses during the reporting period. Significant accounting policies employed by the Company, including the use of estimates, are presented in Note 1 to the Consolidated Financial Statements in Item 8.

Critical accounting estimates are those that require management to make assumptions that are uncertain at the time and where different estimates that management reasonably could have used, or changes in the accounting estimates that are reasonably likely to occur from period to period, would have a material impact on the Company’s financial position, results of operations, or cash flows. The Company’s most critical accounting estimates relate to the following: adjustments to revenue, accounts receivable, inventories, income taxes and goodwill, other intangibles and long-lived assets, as discussed

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below. Because of the uncertainty inherent in these critical estimates, actual results could differ from such estimates and such differences could be material.

Adjustments to Revenue

Net revenue from wholesale product sales is recognized upon the transfer of title and risk of ownership to customers. Wholesale revenue is recorded net of discounts, as well as provisions for estimated returns, allowances and doubtful accounts. On a seasonal basis, the Company negotiates price adjustments with retailers as sales incentives or to partially reimburse them for the cost of certain promotions. The Company estimates the cost of such adjustments on an ongoing basis considering historical trends, projected seasonal results and an evaluation of current economic conditions. These costs are recorded as a reduction to net revenue. The Company’s estimates of these costs have historically been reasonably accurate.

Accounts Receivable

In the normal course of business, the Company grants credit directly to certain retail store customers. Accounts receivable are recorded net of an allowance for doubtful accounts. The Company estimates the allowance for doubtful accounts based upon an analysis of the aging of accounts receivable at the date of the financial statements, assessments of collectibility based on historic trends and an evaluation of economic conditions.

Inventories

Inventories are valued at the lower of cost (weighted average method) or market. Substantially all inventories are comprised of finished goods. The Company continually evaluates its inventories by assessing slow moving current product as well as prior seasons’ inventory. The market value of non-current inventory is estimated based on historical sales trends for this category of inventory of the Company’s individual product lines, the impact of market trends, an evaluation of economic conditions and the value of current orders relating to the future sales of this type of inventory.

Income Taxes

The Company has recorded its provision for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates that will be in effect at the time such differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company evaluates the probability of realizing its deferred tax assets on an ongoing basis. This evaluation includes estimating the Company’s future taxable income in each of the taxing jurisdictions in which the Company operates as well as the feasibility of tax planning strategies. The Company is required to provide a valuation allowance if it is determined to be more likely than not that the Company will not be able to realize certain of its deferred tax assets. For certain of the Company’s deferred tax assets, the Company had previously determined that it was not more likely than not that these assets will be realized and recorded the appropriate valuation allowance. Should the Company determine that it is more likely than not that it will realize certain of its deferred tax assets in the future, an adjustment would be required to reduce the existing valuation allowance and increase income. Conversely, if the Company should determine that an adjustment to increase the valuation allowance is required, such an adjustment would be charged to income tax expense in the period such conclusion was reached.

The Company does not record a provision for U.S. income taxes on undistributed earnings of Tommy Hilfiger Canada, Inc., which it does not expect to repatriate in the foreseeable future.

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Goodwill, Other Intangibles and Long-Lived Assets

Effective April 1, 2002, the Company adopted SFAS 142. SFAS 142 requires that goodwill and intangible assets with indefinite lives no longer be amortized, but rather be tested at least annually for impairment. Intangible assets with definite lives continue to be amortized over their estimated lives, and reviewed for impairment in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.”

Before adopting the provisions of SFAS 142, the Company amortized goodwill on a straight-line basis over its estimated useful life. Beginning in fiscal 2003, consistent with the requirements of SFAS 142, the Company no longer amortizes goodwill. The Company reviews goodwill annually for impairment. In addition, trademarks that have been deemed to have indefinite lives, are reviewed at least annually for potential value impairment.

The Company continually evaluates whether events and circumstances have occurred that indicate the remaining estimated useful lives of other long-lived assets may warrant revision or that the remaining balance may not be recoverable. When factors indicate that an asset should be evaluated for possible impairment, the Company reviews long lived assets to assess recoverability from future operations using undiscounted cash flows. Impairments are recognized in earnings to the extent that carrying value exceeds fair value.

Seasonality

The Company’s business is impacted by the general seasonal trends characteristic of the apparel and retail industries. The Company’s Wholesale revenue, particularly that from its European operations, is generally highest during the second and fourth fiscal quarters, while the Company’s Retail segment generally contributes its highest levels of revenue during the third fiscal quarter. As the timing of Wholesale product shipments and other events affecting the retail business may vary, results for any particular quarter might not be indicative of results for the full year.

Inflation

The Company believes that inflation has not had a material effect on its net revenue or profitability in recent years.

Exchange Rates

The Company received United States dollars for approximately 72% of its product sales during fiscal 2004. Substantially all inventory purchases from contract manufacturers throughout the world are also denominated in United States dollars; however, purchase prices for the Company’s products may be impacted by fluctuations in the exchange rate between the United States dollar and the local currencies of the contract manufacturers, which may have the effect of increasing the Company’s cost of goods in the future. During the last three fiscal years, exchange rate fluctuations have not had a material impact on the Company’s inventory costs; however, due to the number of currencies involved and the fact that not all foreign currencies react in the same manner against the United States dollar, the Company cannot quantify in any meaningful way the potential effect of such fluctuations on future income. The Company does not engage in hedging activities with respect to such exchange rate risk.

The Company does, however, seek to protect against adverse movements in currency exchange rates which might affect certain firm commitments or transactions. These include the purchase of inventory, capital expenditures, collection of foreign royalty payments and certain intercompany commitments. The Company enters into forward contracts, generally with maturities up to 15 months, to sell or purchase foreign currency in order to hedge against such risks. The Company does not use financial instruments for speculative or trading purposes. At March 31, 2004, the Company had contracts to exchange foreign currencies, principally, the Japanese yen, the Euro and the Canadian dollar, having a total notional amount of $133,602. No significant gain or loss was inherent in such contracts at March 31, 2004. Gains or losses on such forward contracts are recognized in other comprehensive income on a mark-to-market basis and, ultimately, in earnings at the time the underlying hedge transaction is completed or recognized in earnings. While a hypothetical 10% adverse change in all of the relevant exchange rates would potentially cause a decrease in the fair value of the contracts of approximately $13,701, the Company would experience an offsetting benefit in the underlying transactions.

Recently Issued Accounting Standards

In December 2003, The Securities Exchange Commission issued Staff Accounting Bulletin No. 104 “Revenue Recognition” (“SAB 104”). SAB 104 expands previously issued guidance on the subject of revenue recognition and provides specific criteria which must be fulfilled to permit the recognition of revenue from transactions. The Company does not expect the issuance of SAB 104 to have any effect on the Company’s results of operations or financial position.

        In January 2003, the FASB issued Financial Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities” which was amended by FIN46R in December, 2003. A variable interest entity is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not have equity investors with voting rights, or (b) has equity investors that do not provide sufficient financial resources for the entity to support its activities. Historically, entities generally were not consolidated unless the entity was controlled through voting interests. FIN 46R changes that by requiring a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entity’s activities or entitled to receive a majority of the entity’s residual returns or both. A company that consolidates a variable interest entity is called the “primary beneficiary” of that entity. FIN 46R also requires disclosures about variable interest entities that a company is not required to consolidate but in which it has a significant variable interest. The Company does not have any variable interest entities. FIN 46R did not have any effect on the Company’s results of operations or financial position.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such statements are indicated by words or phrases such as “anticipate,” “estimate,” “project,” “expect,” “believe” and similar words or phrases. Such statements are based on current expectations and are subject to certain risks and uncertainties,

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including, but not limited to, the overall level of consumer spending on apparel; the financial strength of the retail industry generally and the Company’s customers, distributors, licensees and franchisees in particular; changes in trends in the market segments and geographic areas in which the Company competes; the level of demand for the Company’s products; actions by our major customers or existing or new competitors; the effect of the Company’s strategy to reduce U.S. distribution in order to bring supply and demand into balance; changes in currency and interest rates; changes in applicable tax laws, regulations and treaties and changes in economic or political conditions or trade regulations in the markets where the Company sells or sources its products, as well as other risks and uncertainties set forth in the Company’s publicly-filed documents, including this Annual Report on Form 10-K. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

See the sections entitled “Liquidity and Capital Resources” and “Exchange Rates” in Item 7, which sections are incorporated herein by reference.

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Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Operations for the fiscal years ended March 31, 2004, 2003 and 2002

Consolidated Balance Sheets as of March 31, 2004 and 2003

Consolidated Statements of Cash Flows for the fiscal years ended March 31, 2004, 2003 and 2002

Consolidated Statements of Changes in Shareholders’ Equity for the fiscal years ended March 31, 2004, 2003 and 2002

Notes to Consolidated Financial Statements

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

F-1

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Tommy Hilfiger Corporation:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders’ equity and cash flows present fairly, in all material respects, the financial position of Tommy Hilfiger Corporation and its subsidiaries (the “Company”) at March 31, 2004 and March 31, 2003, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2004 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 6 to the consolidated financial statements, effective April 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

New York, New York

May 27, 2004

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Table of Contents

TOMMY HILFIGER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

See Accompanying Notes to Consolidated Financial Statements.

F-3

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TOMMY HILFIGER CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)