Ten steps taken to turnaround Liz Claiborne
By Leonie Barrie | 8 September 2011
Apparel seller Liz Claiborne Inc has spent the best part of the last four years trying to reduce its long-term debt and bring expenses in line with weak sales and consolidation of its department store customers. Measures have included the axing of thousands of global jobs, and the disposal of at least 14 brands - the most recent of which was its loss-making Mexx business. Here just-style charts its turnaround efforts so far.
- In 2007, apparel giant Liz Claiborne embarked on a radical change of direction, six months after William McComb took the helm as chief executive officer. After two decades buying small, niche-oriented brands, the company announced plans to focus on smaller, more powerful labels and develop its own retail businesses. The reorganisation into two units - Partnered Brands and Direct Brands - also saw 16 brands marked for "strategic review" and the possibility of a sale, liquidation or licensing. A third segment, International-Based Direct Brands (essentially its Mexx business), was introduced in early 2009.
- The first part of its strategic review was completed in October 2007 when Li & Fung USA agreed to buy the Emma James, Intuitions, JH Collectibles and Tapemeasure lines for an undisclosed sum. At the same time, Liz Claiborne revealed plans to discontinue its First Issue business at Sears and incorporate the Stamp 10 brand into the Axcess label sold at Kohl's, and integrate the Tint product into the Liz & Co line sold at JC Penney.
- The company then sold of its Laundry By Design and C&C California brands to Perry Ellis International, and its climbing and yoga wear brand Prana for around US$40m to Prana Living LLC, a company formed by Prana's management team and private equity firm Steelpoint Capital Partners. The Sigrid Olsen line was shuttered and the Ellen Tracy brand sold to a group of investors including Radius Partners, William Sweedler of Windsong Brands, Barry Sternlicht and Marvin Traub.
- In October 2008 the strategic reorganisation continued with the sale of fashion label Enyce to entrepreneur and rap artist Sean "Diddy" Coombs. Liz Claiborne and designer Narciso Rodriguez also agreed to go their separate ways after struggling to agree on how to develop the luxury brand, 18 months after the mid-market apparel firm bought a 50% stake in designer business.
- Plans to slash 725 positions or 8% of its US workforce were revealed in February 2009, along with moves to close a distribution centre in Mt Pocono, Pennsylvania and suspend performance bonuses for all employees. The job cuts spanned all levels of the company.
- A re-think of its 'one size fits all' sourcing model in February 2009 saw Hong Kong-based supply-chain giant Li & Fung take on Liz Claiborne's sourcing operations in a deal worth up to $83m. The pact covered the Lucky Brand, Juicy Couture, Kate Spade, and Isaac Mizrahi designed Liz Claiborne New York lines. The move was intended to give Liz Claiborne more flexibility, tackle the specific needs of each brand, better buying power and improved speed-to-market. The move followed a similar sourcing deal agreed for Mexx Europe in November 2008.
- October 2009 saw the inking of a ten-year licensing deal for its flagship brands with department store retailer JC Penney - and the decision to pull its Liz Claiborne New York brand, designed by Isaac Mizrahi, from department stores and distribute it instead through a new deal with shopping channel QVC. Liz Claiborne retained the rights to market and distribute the labels outside of the US.
- In July 2010 the company revealed plans to exit its 87 loss-making outlet stores in the US and Puerto Rico early next year, saying the format "no longer makes economic sense" following the launch of the Liz Claiborne brand at JCPenney and Liz Claiborne New York at QVC.
- In August 2011 it signed a distribution deal with sourcing giant Li & Fung Ltd to deliver goods to its US stores and wholesale business. The move will reduce its fixed cost base for distribution, but related functions such as logistics and compliance will remain in-house, and is part of a wider goal to cut $25m worth of costs.
- And last week (2 September) Liz Claiborne Inc revealed plans to sell its loss-making Mexx business to a joint venture led by private equity firm The Gores Group. The transaction will see Liz Claiborne receive $85m and an 18.75% stake in the joint venture, with The Gores Group owning the remaining 81.25%. This not only takes Liz Claiborne closer to its goal of reducing its 2011 debt to a level below last year's $578m, but also allows it to benefit from the long term growth potential of Mexx - which it bought in May 2001 for $264m.
The moves leave Liz Claiborne Inc with a portfolio of retail-based premium brands including Juicy Couture, Kate Spade New York, and Lucky Brand. Its department store-based brands include the Monet family, Kensie, Kensiegirl, Mac & Jac, and the licensed DKNY Jeans and DKNY Active brands. The Liz Claiborne and Claiborne brands are available at JCPenney, and the Liz Claiborne New York label designed by Isaac Mizrahi is available at QVC. The Dana Buchman line is sold at Kohl's.
Significantly, though, analysts don't think Mexx will be the last of the brands to be sold off by Liz Claiborne Inc as it continues to try to reduce its long-term debt and aggressively manage costs.
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Ten steps taken to turnaround Liz Claiborne
8 Sep 2011 -