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Next Step: Claiborne’s Succession Challenge

Paul Charron will be a tough act to follow and his successor needs to have the industry acumen to continue to steer Liz Claiborne Inc. on an aggressive expansion path.

NEW YORK — Paul Charron will be a tough act to follow and his successor needs to have the industry acumen to continue to steer Liz Claiborne Inc. on an aggressive expansion path.

A day after Charron said he would retire as chairman and chief executive officer of the $4.6 billion apparel conglomerate at the end of the year, analysts and industry executives on Wednesday praised his vision and leadership skills, and said his departure leaves Claiborne somewhat vulnerable.

Some said that with the promotion of Trudy Sullivan to president of the company, Claiborne could be preparing her to take the helm. Charron said that while the company will not rule anyone out, there will be various people considered for the job.

“Trudy is an extremely talented executive and we look forward to an even greater contribution from her as president,” Charron said in an interview Wednesday.

“With respect to the ceo position and consistent with good corporate governance practices, the board will be looking at qualified internal and external candidates with proven leadership skills from both inside and outside the company. Beyond that, we’re not going to speculate,” Charron said.

Analysts wondered if Charron’s departure would make a merger or takeover of Claiborne more attractive.

However, there should be few short-term effects on the company, given that Charron plans to stay on board for the rest of the year, said J.P. Morgan Chase analyst Robert Samuels.

“I expect them to continue with their diversification strategy and to continue with this push into specialty retail that they’ve been really doing a good job with over the past few years,” Samuels said.

Claiborne has expanded its specialty retail footprint in recent years, with new stores under several brands, including Sigrid Olsen and Mexx. It also continues its talks with J. Jill about a possible acquisition of that retailer. Charron’s departure will be eased by what Samuels described as a “pretty talented bench” of executives.

“The promotion of Trudy Sullivan to president obviously puts her in position to be one who will be seriously considered for the top spot,” he said. “I do think that they’ll first look internally.”

A replacement from the consumer products sector is also a possibility, given Charron’s background as a Procter & Gamble executive. But Charron gained apparel industry experience at VF Corp. before joining Claiborne.

Whoever ultimately steps up to take Charron’s place will have “gargantuan shoes” to fill, said analyst Jennifer Black, president of Jennifer Black & Associates.

“They need somebody who knows all aspects of the business, and I guess I would find it unlikely that they would pick another person, for example, from the packaged-goods industry,” said Black. “Liz is a different company today than it was when Paul joined.”

Charron has empowered his executives to make their own decisions, said Black, noting his successor will have to continue that management model. Often a change in leadership at a company piques the interest of suitors, but Black said she was unsure if anyone would make such a move.

“I think it’s possible and I think it’s an interesting thought from the perspective of what the department store industry has done and it would give them a taste of their own medicine,” she added.

Vendors have been challenged lately by ever-growing department store chains rising out of a series of mergers, such as Federated Department Stores’ buyout of longtime rival May Department Stores.

Consultant Emanuel Weintraub said he believes that when Claiborne looks for a successor to Charron, it needs to find someone with clear knowledge of the apparel industry, as well as talents beyond.

“Paul will be a very hard act to follow,” Weintraub said. “He is very focused and has a clear vision on multiple levels. I think that the successor will have to have a vision of Liz in the global consumer marketplace, since that is where the growth in apparel is.”

Weintraub said Claiborne has major growth opportunity overseas and Charron’s replacement should be capable of taking them there.

As far as a recommendation for a replacement, Weintraub said he sees Roger Farah, chief operating officer at Polo Ralph Lauren Corp., as a good possibility.

“With his experience, Roger would be a very good pick,” he said. “I think he can understand that the mother lode is in the U.S., but the growth area is there internationally.”

Catherine Sadler, president of the Catherine Sadler Group of brand consultants, said she agrees that Farah would be an “exciting candidate” to take the reins at Claiborne, but also believes Charron will be hard to replace.

“The thing about Paul Charron is that he is an extraordinary individual,” Sadler said. “He has that perfect mix of being a great business manager with a true understanding of the need for marketing and the essence of branding. Those are going to be hard skills to replace.”

Denise Seegal, president and ceo at VF Sportswear, had the opportunity to work with Charron at Claiborne for four years when she joined as president in 1996.

“Paul Charron is a dynamic leader who had the vision to transform Liz Claiborne Inc. into a diversified portfolio of brands that addressed consumer needs across many channels of distribution,” she said.

“He developed the strategy, surrounded himself with very talented executives and then through consistent, strong execution, delivered value to his shareholders year after year.”