Liz Claiborne to Buy L.A.-Area Maker of Upscale Clothing
Liz Claiborne, intent on clothing women up and down the fashion spectrum, said Thursday that it has agreed to buy the Los Angeles-area maker of Laundry clothing, a high-end label of trendy dresses and sportswear.
Terms of the deal were not disclosed.
Laundry, led by designer Shelli Segal, joins an expanding collection of brands at Claiborne aimed at garnering younger shoppers who are willing to pay handsomely for their clothing. Claiborne’s recent acquisition spree includes Lucky Brand Dungarees, another trendy label from Los Angeles, and the licenses to make jeans and juniors clothing under the DKNY and Kenneth Cole names.
Thursday’s deal would give the already formidable Claiborne more than just young, wealthy customers. The company would also gain increasing clout with retailers while giving Laundry, which has annual sales of about $80 million, access to capital for expansion and muscle for advertising and marketing.
“The prestige of the Laundry brand, coupled with Shelli Segal’s talent and vision, is very attractive,” said Claiborne President Denise V. Seegal. “We also felt that a West Coast presence was very important for our portfolio. A lot of the trends that are taking place right now with the younger consumers are taking place on the West Coast.”
Leslie McCall, an analyst with Brown Bros. Harriman in New York, said that with Claiborne, Laundry has the potential to become highly profitable as it taps into the bigger company’s economies of scale, penetration and expertise.
Claiborne has said Laundry’s profitability is roughly equal to its own, with about 11% operating margins.
McCall, using an industry benchmark related to sales and margins, said that, depending on the value of assets involved in the transaction, Claiborne might have paid anywhere from $50 million to $75 million for the company.
Claiborne’s strategy seems to be one of growth through acquisition.
The label began with the Liz Claiborne name in 1975, created and expanded for career women in their 30s. From there, permutations of the name were assigned to new lines: Claiborne, for men; Liz & Co., for knits; and Elisabeth for plus sizes.
At the end of the 1980s, Claiborne began buying other labels, starting with the moderate Crazy Horse, sold at J.C. Penney stores, and Villager, sold at Mervyn’s. It also brought on Russ Togs and Red Horse, and added, for its more affluent customers, Dana Buchman and Dana Buchman Luxe for the bridge and upscale markets, respectively.
From there, it moved down in age and up in price from its original customer group.
It added almost 85% of Segrets, which makes Sigrid Olsen sportswear; a 7.4% stake in Kenneth Cole Productions, along with the license for women’s and juniors apparel under that name; a license for DKNY jeans, active wear and juniors sportswear; and an 85% interest in Vernon-based Lucky Brand Dungarees.
Claiborne’s Seegal, however, said the company isn’t done buying brands to appeal to the Generation X or Y consumer.
If Lucky jeans are what trendy twentysomethings wear on their days off, Laundry is what they wear when they dress up, Claiborne believes. Seegal said the company has plans to expand both the number of department stores carrying Laundry as well as the amount of Laundry product carried.
Claiborne hopes to turn Laundry into a retailing powerhouse, Seegal said, expanding from the line’s flagship store in New York’s SoHo district.
“It’s different, and that’s exactly what they want,” said Jennifer Black, an analyst with Black & Co. “They want to have a product for every channel of distribution and every age group.”
In acquiring Laundry, Claiborne is buying the stock of the firm’s holding company, Podell Industries Inc. Anthony Podell, owner of Podell Industries, founded the firm 12 years ago. He brought in designer Segal eight years ago and promised that her name would be on every Laundry piece; the labels read “Laundry by Shelli Segal.”
Laundry is sold in 250 stores nationwide, mostly in department stores such as Bloomingdale’s, Neiman Marcus, Nordstrom and Macy’s, but also at stand-alone boutiques. Half the line is devoted to sportswear, and the remainder is dressy clothing known for sophisticated colors and body-conscious designs.
Huntington Park-based Laundry claims a unique advantage. Though its sweaters are made in China, 75% of its manufacturing is done in the Los Angeles area, which the company says ensures both quality and quick turnaround.
“We can beat anybody else by months,” Podell said. “It’s what makes us who we are.”
Claiborne shares closed Thursday at $33.50, up 25 cents, on the New York Stock Exchange.
