NEW YORK — Analysts and consultants gave the thumbs-up to William L. McComb’s restructuring moves at Liz Claiborne Inc. and are waiting to see what the July 11 Investor Day will hold.
The company will eliminate the group president role — and some of the executives who held that title — and split its portfolio between “power brands” and the rest, the latter of which could be sold, spun off or closed.
Observers generally praised McComb’s biggest step yet in his seven months as chief executive officer of the $4.99 billion vendor, which has been struggling financially. But they hope more specific news will come in three weeks.
“Bill McComb still sees the forest from the trees, which should be very encouraging for the company,” said Allan Ellinger, senior managing director at Marketing Management Group. “He’s still objective in terms of the organization and its structure, and can still make objective decisions for the company.”
McComb is dividing Claiborne’s portfolio into “a brand-centric, vertically organized direct brands division” — Juicy Couture, Lucky Brand, Kate Spade, Sigrid Olsen and Mexx — and “a customer-focused, cost-efficient partnered brands division,” including Liz Claiborne/Claiborne, Monet, Ellen Tracy, Dana Buchman, DKNY Jeans, DKNY Active, and cosmetics and fragrances, and exclusive brands for J.C. Penney Co. Inc., Kohl’s Corp. and Sears Holdings Corp.
McComb explained Claiborne will invest more money and talent into the direct brands, for which all of their parts will be run under their own direct management, giving the brands the same structure that Coach had when it was sprung out of Sara Lee.
“Being a veteran of Coach when it was under Sara Lee, I can say with all certainty this new structure will definitely drive the growth of each of the direct-to-consumer brands,” said Catherine Sadler, president of New York marketing firm Catherine Sadler Group. “Clearly McComb understands these are the company growth vehicles, and he also understands that the focus has to be on strongly positioned brands that play in unique arenas.”
Freeing brands from the group president model allows all of them to receive more attention, she added, noting small brands often suffer if a manager also has more high-profile brands like Juicy Couture, which can absorb attention.
Claiborne president Trudy Sullivan will run the partnered brands, and Jill Granoff, a group president just promoted to executive vice president, will be in charge of the direct-to-consumer brands Juicy Couture, Lucky Brand and Sigrid Olsen, as well as the company’s outlet and e-commerce business. Both will report to McComb.
Sadler objected to the idea that the direct-to-consumer brands were necessarily the more exciting division to run. “It’s the partnered brands where a lot of heavy lifting needs to take place, which opens up the opportunity for Liz Claiborne Inc. to reconnect the consumer with iconic American brands like Ellen Tracy,” Sadler said.
Some Claiborne veterans will be exiting the company in the reorganization. The company is still in talks with Pamela Thomas-Graham, previously group president of better and moderate apparel, about possibly finding her a new spot. Susan Davidson, group president of nonapparel categories who gained oversight of Kate Spade in February, and Karen Murray, group president and Claiborne veteran who lost responsibility over men’s wear and midtier brands in February, both will be leaving the company.
“We’re obviously going in a different direction,” Murray said in a statement. “I have had a fabulous career at Liz Claiborne and I am very proud of my achievements there.” Murray said she will take about a month off to travel and spend time with her son before actively job-searching.
Analyst Jennifer Black, of the firm that bears her name, said she has “never seen anything like this” in her 28 years in the industry.
“To align the business and take the cost structure out makes sense, but you are taking some very seasoned people out of these positions,” Black said. “These people will have no trouble getting jobs and will soon be competing against Liz Claiborne. So the $64,000 question is whether a new management team can execute. Are they cutting fat or are they cutting muscle?”
Black also said she thinks the firm lacks merchant talent and would like to see a chief merchandising officer hired.
Citigroup analyst Kate McShane was encouraged by the retention of “key talent,” including Sullivan, Granoff and the founders of both Juicy and Lucky. But, she added, “I couldn’t help but notice Kate Spade’s name wasn’t in the release. Her contract is up in July, and I now think she may leave, which we view as a slight negative, though I do not know if the market will care because there are so many moving parts on this story.”
The company expects to hire a leader for the Kate Spade brand, who will report directly to McComb.