Management Alterations Become Claiborne
Liz is back.
Liz Claiborne Inc., the women’s apparel giant whose stellar growth and industry leadership were badly marred by an early 1990s slump, is back in fashion on Main Street and on Wall Street.
Revamped designs, new product lines, wider store distribution, aggressive cost-cutting and streamlined management are again lifting the company’s sales and profit. There’s speculation that Claiborne--with $2 billion in annual sales--will again report unexpectedly high earnings when it posts its summer 1996 results Monday.
All of which is driving Claiborne’s shares even higher on the New York Stock Exchange. After surging $3 a share Wednesday, the stock gained $2.75 more, to $44.875 a share, in heavy trading Thursday to reach its highest level in 3 1/2 years. The stock price has more than doubled in just the past 18 months.
Its rally also followed Claiborne’s latest maneuver: a plan to sell a moderately priced line of casual clothes through retail giant Sears, Roebuck & Co. And in Claiborne’s case, any sales gains tend to drop straight to the bottom line because the New York-based company has virtually no long-term debt to finance.
Credit the rebound to Claiborne’s chief executive, Paul Charron, who was hired in 1994 to reverse the company’s slide. Using a methodical series of steps, he has Claiborne again exploiting its advantage as the nation’s biggest marketer of women’s apparel.
“Liz Claiborne is again becoming the fashion-forward company that it was years back,” said Jennifer Black Groves, whose Black & Co. investment firm in Portland, Ore., follows the industry.
To be sure, it’s been rough sledding for women’s apparel makers during much of the 1990s, especially in the moderately priced market where tightfisted shoppers and department-store discounts have become commonplace.
But even in the more robust market for pricier garb, Claiborne has lost valuable market share to the likes of Jones Apparel Group Inc., whose sales (and stocks) have surged in the past few years.
Indeed, Claiborne was fast going out of vogue when Charron arrived. Founded by Liz Claiborne (now retired) and others in 1976, the company specialized in affordable, contemporary clothes for the office, and the label became a national hit as women flooded into the workplace in the 1980s.
Sales skyrocketed to $2 billion in just 15 years, and Claiborne often earned 25 cents per dollar of sales, a huge achievement in the capricious rag trade and one that earned Claiborne big chunks of department stores’ square footage.
But the wheels came off starting in 1992. The company lost sight of its customers’ tastes, which included a big shift among office workers from formal wear to more casual designs. Shoppers began dismissing Claiborne’s styles as dowdy, overpriced and too similar to those of rival brands in the next aisle.
The quality and fit of Claiborne’s clothes also deteriorated, and the company’s reputation suffered as retailers heavily discounted its goods to move them out the door.
Charron’s response: He pared Claiborne’s excess inventories, shaved its production and delivery schedules and cut other costs. Managers got more authority to make quick changes. Claiborne’s struggling 77-store First Issue chain that sold moderately priced goods was shut down, and other divisions were realigned.
He launched studies and focus groups to find out what clothes women wanted, and gave his designers a mandate to change Claiborne’s styles--quickly.
“We had to recognize we weren’t going back to our future,” Charron, 54, said in a telephone interview Thursday. “We’re instead looking at the way a lady lives her life today. She has many roles at different times in the day, and she’s looking for apparel that is versatile.”
Claiborne’s designs were not only updated but expanded, so that women had more choices. The company also plans to unveil new in-store presentations in about 100 stores, which will include “wardrobe outfitters” that will showcase its apparel.
Look for more such merchandising. Earlier this month, Claiborne hired Calvin Klein Inc. executive Denise Seegal to be Claiborne’s president--a post Charron also had held--and to bring more fashion and merchandising skills to the company.
Claiborne can use those skills. Case in point: Its flagship line of formal office wear, or “career” clothes, is facing stiff competition from Jones Apparel Group and others, said Theresa Matacia of Montgomery Securities in San Francisco.
Claiborne “has made a lot of improvement there,” she said, “but they still have work to do.”
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In Style
Liz Claiborne’s stock is recovering as the apparel maker’s profit is rising. Quarterly closes, and latest:
Thursday close: $44.875
Source: Bloomberg Business News
