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Can Liz Claiborne Remain on Top After Its Founders Retire

From Reuters

Liz Claiborne Inc., the clothier that stormed the fashion industry in 1976 with its ready-to-wear designs for working women, will be challenged to maintain its pattern of strong earnings after its founding couple departs in June, analysts said Monday.

New York-based Liz Claiborne, which has grown from a small outfit to a $1-billion fashion powerhouse in the past 13 years, said Sunday that its First Couple--Arthur and Elisabeth Claiborne Ortenberg--will retire in June to pursue “environmental, social and other personal interests.”

The shares fell $1.125, about 6%, to $17 in over-the-counter trading Monday on fears for the company’s future under new management, analysts said.

“Liz Claiborne has been a big power in the company,” said analyst Edward Johnson of Prescott, Ball & Turben.

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“There is a question whether Liz Claiborne the company can continue the success of the last 10 years,” added Marcia Koory at Kirkpatrick, Pettis.

‘Very Healthy Posture’

Liz Claiborne began as an upstart, private concern in the hotly contested New York fashion industry. Created by two locals--Claiborne, a clothing designer for two decades, and husband Arthur, a textile executive--the company boasted sales of $2.6 million its first fiscal year.

But even bigger success lay ahead. Claiborne’s focus on clothing for professional women rather than high-priced evening dresses found a grateful market in the nation’s burgeoning female work force. Annual sales had surged to $117 million when the company went public in 1981.

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The Ortenbergs said their retirement should not hurt the company’s stylish future, despite some doubt on Wall Street about the transition. Both Claiborne, 59, and Ortenberg, 62, will remain directors of the company.

“We are confident that the company is in a very healthy posture, with strong management in place,” the Ortenbergs said in a statement. “We are confident that our designers and product developers--in all the company’s divisions--will perpetuate and enhance the Claiborne concept of integrity of design, color, quality, fit and fabric.”

“For the past few years, Liz has taken a teaching and consulting role,” added company spokesman Sam Miller. “They (the Ortenbergs) feel they have a good support team.”

Miller added that the company’s earnings outlook is still quite good in spite of the 18-month slump in the women’s apparel industry. The clothier has recently expanded into menswear, scarfs, belts and purses to broaden its sales base.

“The company sells moderately-priced designer clothes, and that’s where the growth is going to be,” Koory said. It (the company) is in a good position,” Koory said.

Liz Claiborne Inc. said fourth-quarter profit rose 18.4% to $26.6 million, compared to $22.5 million a year ago. Sales rose 21.7% to $290.2 million.

Analysts predict that the company will earn $1.35 to $1.45 a share in 1989, Miller said, versus $1.26 a share in 1988 and $1.32 in 1987.

Other analysts said the stock’s fall will be only a short-term phenomenon, as the Ortenbergs’ retirement should not cause major changes in the company’s outlook.

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“Their (the Ortenbergs’) stock holdings are quite significant. I don’t think they’ll be afraid to give their opinion,” Koory added.


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