AS specially remixed tracks by the Clash and Franz Ferdinand jangled the porcelain-capped teeth of New York’s fashion glitter-ati, Tommy Hilfiger stepped on to a vast catwalk strewn with artificial trees.

His appearance in the Hammerstein ballroom on Friday night was the first time the American designer had closed New York fashion week and the first time in almost two years that he had staged a catwalk show anywhere.

He may have been wearing his trademark blue blazer, jeans and white shirt but, behind him, two dozen models showed off his new “modern classic” clothes, including a pearl-encrusted midnight-blue cocktail dress and a Donegal Tweed Tuxedo with black silk lapels. There was no Ali G-style red, white and blue sportswear in da house.

Hilfiger, 55, is reinventing his label. The one-time king of street fashion wants to be a lord of catwalk chic. “This is a new chapter. I have a totally different perspective,” he said backstage. “We are rethinking where we belong in the world of fashion, going more upscale, more sophisticated.”

Out go rappers in logo-heavy athletic kit. In comes the urbane figure of Arsenal striker Thierry Henry, modelling modern tailoring in luxurious fabrics, and R&B singer Beyoncé in a pale blue full-length silk evening gown.

Hilfiger describes his new collection as “more classic, refined, more luxurious and well-thought out. It is without logos, without the red, white and blue, without a lot of bells and whistles. We are more dressed-up.”

The same goes for Hilfiger stores. In Britain the former London flagship in Bond Street was decorated with bright red electric guitars, but the new £5m Regent Street store that opened just before Christmas is all dark wood and matt black walls. “In London we have opened a very nice store, selling very nice clothes, in a very nice area,” said Hilfiger, mimicking a posh British accent.

Trading-up is a sharp change of strategy for a man who splashed his giant all-Ameri-can logo over so many baggy jeans and cotton sweatshirts in the 1990s that Los Angeles rapper Snoop Dogg acclaimed him in a song as “my nigga”. Why is Hilfiger going back to his preppy roots?

He has no choice. He may have hit pay dirt in the 1990s, but the music stopped a few years ago when it became clear that the publicly-owned firm had expanded too fast and the label had lost its cachet.

“It was a classic case of overexposure,” he conceded. His clothes, which were sold in almost 2,000 American department stores and discount outlets, got “lost in a sea of mark-downs and sales”.

As competition increased, with new American designers such as Sean John, Roca Wear and Abercrombie & Fitch targeting the urban youth market, Hilfiger hit his autumn/ winter of discontent. Annual American earnings slumped by nearly half, from almost £1 billion in 2000 to about £500m in 2005. Two years ago the company, in which he had a 10% stake, was put up for auction.

Desperate to stop the firm falling into the hands of one of America’s giant retail groups, Hilfiger cooked up a rescue package with new chief executive Fred Gehring.

He convinced private-equity group Apax Partners to lead a £800m buyout and adopt a drastic restructuring.

Hilfiger himself netted £32m, but the real prize was not cash — he is now back in full

control of the collection. As he made last-minute changes to the models’ looks last week, demanding the silver-grey herringbone trousers “here” and asking his English stylist Charlotte Stockdale to let down model Anna Ilnitskaya’s hair “there”, he explained: “As a private firm, we are more creative, innovative, enterprising. We do not have to worry all the time about what will sell and sell fast to meet strict quarterly targets to please shareholders.”

Freed from Wall Street shackles, Hilfiger has dumped the logo-heavy look and some cheap sub-brands, notably childrenswear and the junior jeanswear teen collection that “were there for volume only” and were tarnishing the label’s image.

He cancelled catwalk shows “because I was not confident that the clothes in America were runway-worthy; they were too depart-ment-store orientated”. He slashed the American workforce by 40% and closed dozens of stores and concessions.

His absence from the catwalk enabled him to plan for the long term — for the first time since he founded his business selling jeans out of the boot of his VW Beetle more than 30 years ago.

“It was great being away because it gave me a chance to regroup with my new partners. It was a unique, once-in-a-lifetime opportunity to sit back, take a look at the world around and figure out where we belong,” he said.

Hilfiger is convinced that a smaller firm, turning out less glitzy collections, will mean higher-quality clothes that will appeal to older, wealthier customers who are prepared to pay higher prices.

And he has the figures to prove it. Ironically for the ultimate, all-American brand, the inspiration for the new business plan comes from Europe. The firm’s European arm, which Gehring ran from Amsterdam before becoming chief executive, has always been semi-independent of its parent.

A few years ago Gehring introduced upmarket styles similar to those on the catwalk on Friday.

While the American business was on the rack, European sales, especially on the Continent, began rising sharply. Turnover grew from £200m in 2003 to more than £400m last year. “Europe has been a learning experience for us, so here we are now in America,” said Hilfiger.

The change of style may be working in Europe, but there is no guarantee that it will appeal to a generation of American customers who have grown up with Tommy-branded sportswear. Analysts say Hilfiger will have a tough time slugging it out in the upper part of the American market, which is dominated by the likes of Ralph Lauren.

Hilfiger insisted: “A lot of brands have gone through a lot of different life cycles. Ver-sace was one thing in the 1980s, it changed in the 1990s and now is something else.

“We’re more fun than Ralph Lauren, more relaxed, rebellious and cooler. Ralph is very traditional. We are not stuck in the mud trying to be the American designer brand.”

Observers say there is no guarantee that growth here will continue. In Britain, in particular, retailing is becoming more competitive with high-street brands, notably Zara, H&M and Topshop, pioneering fast fashion.

The newly upmarket designer loftily dismisses brands that were once his rivals, describing them as cheap and not-so-cheer-ful. “There will always be people who wanta BMW and those who want a Ford,” he said. “I would rather build a great BMW than be on the lower end, lowering quality to get better prices.”

Apax, the private-equity house that controls 80% of Hilfiger, has given the designer and Gehring five years to restore the label to its former glory. Hilfiger insists “the first few months of the new project have been affirmative. The market is responding very well.” But he declined to give any figures.

He did say, however, that 50 new store sa year will open in Europe over the next three years and new, full-price, standalone designer stores will open across America. A new women’s fragrance, called Dreaming, will be launched this autumn.

The applause for his show still filled the Hammerstein ballroom as Hilfiger took a bow on Friday night and strode off the catwalk into the freezing New York night. “We’re setting trends again,” he grinned.

And, with that, he brushed his hair back, sank into a limousine and headed off to host a private party at the ultra-fashionable Bungalow 8 nightclub with Lenny Kravitz and Justin Timberlake.

He and his firm may be leaner and more buttoned-up, but there is still some bling left in the comeback king.

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