NEW YORK -- As Liz Claiborne Inc. struggles to win back the enthusiasm of its customers, the $2.2 billion apparel giant is facing a rapidly rising hurdle: Jones Apparel Group.

Jones, which built its business on Jones New York career wear, has shifted into high gear in the battle for a bigger piece of the better-price sportswear market, both casual and career.

Observers note that Jones is taking direct aim at its chief rival, Claiborne, the country's largest women's apparel manufacturer and four times as big as Jones.

Last November, Jones, based in Bristol, Pa., acquired the beleaguered but long-established Evan-Picone trademark, spruced it up, and launched a career sportswear line under the label for fall, with casual sportswear and dress lines to follow.

For spring 1994, Jones introduced a casual sportswear line under the less expensive Rena Rowan for Saville brand. At the same time, the company is whipping up an aggressive pricing strategy to push its casual sportswear lines -- Jones New York Sport, which consists primarily of knitted garments, and Jones & Co., which features washed and relaxed woven products -- into more retail doors. In 1992, the company introduced Jones Wear, a line of moderate-price traditional career sportswear, which is being sold at 260 J.C. Penney doors.

While the sportswear industry has been in a rut for the past two years, Jones has experienced hefty sales and earnings increases. In 1993, Jones posted a 20 percent jump in earnings, to $49.7 million, and a 24 percent sales increase, to $541.1 million. In comparison, Liz Claiborne's earnings last year skidded 42 percent, to $126.9 million, while sales edged ahead only 0.5 percent, to $2.2 billion.

"The reason for our success even in this difficult market is simple -- we've paid attention to our product, and we've been consistent," said Andrew Grossman, president of Jones Apparel, adding that he's aiming to build the company to $1 billion in sales in three years. "We haven't been all over the place in sourcing, and there hasn't been any huge fluctuation in pricing."

Analysts also attribute Jones's stellar performance in recent seasons to gaining market share from J.H. Collectibles, another big name in career sportswear, and Evan-Picone, under its former ownership at Crystal Brands. Now, they say it is profiting from the woes of Liz Claiborne, whose core $1.2 billion sportswear business, consisting of Collection, LizSport and LizWear, has seen some rough times over the past year.At the same time, some critics have described Claiborne as a company that began losing focus when designer Liz Claiborne and her husband, Arthur Ortenberg, retired in 1989. It continued to be hot until the recession bit into its figures around a year ago, and even though some retailers have cut open-to-buy for Claiborne, it still retains the largest real estate in the better sportswear areas of department stores.

In some cases, however, extra dollars that once might have gone to Claiborne have been diverted to Jones. With revamped fall lines, Claiborne now appears to be rebuilding its traditional acceptance among retailers, but some stores are still playing it cautious.

"I think that Claiborne's fall merchandise looks terrific, but we've still reduced the buy for fall," said one department store merchandise manager. "We just want to be sure that the customer is going to come back to Liz. Instead, we've really tried to maximize the presentation of the Jones lines."

"Jones always looked up to Liz Claiborne for leadership; now Liz is trying to keep up with Jones," said analyst Todd Slater of UBS Securities here, who follows both companies.

Another scenario is being played out at Macy's Herald Square, which had created a larger in-store shop for Liz Claiborne after Saks Fifth Avenue dropped the Claiborne label sportswear last summer. Now, according to sources, Saks plans an in-store shop creating expanded space for Jones New York, and will add Evan-Picone career wear, equaling the space presently given to Liz Claiborne. The new Jones-Evan-Picone shop is to be completed for fall selling.

Grossman said, though, that Jones Apparel's biggest push is in the casual sportswear market, a category that has long been dominated by Claiborne. Casual is said to account for about half -- or $600 million -- of Claiborne's core sportswear business, while for Jones last year it was a mere $70 million. Jones launched its casual business in 1984, but it was only in 1992 that it began to make a major effort. Grossman said he wants to improve that category to between $200 million and $300 million in the next few years.

"It's been a big growth area for us," Grossman said. Casual sportswear sales soared 55 percent last year, fueled by the rapid growth of Jones New York Sport and the introduction of Jones & Co. Jones Sport is now sold in about 2,000 doors, while Jones & Co. is in only 800 doors. Grossman wants their presence at the same level as the more established Jones New York brand, which is in about 3,000 doors.To enhance distribution, Grossman said that the firm has reduced prices in recent seasons in both casual sportswear lines by up to 25 percent to compete more closely with Claiborne's casual offering. He said three designers have been added to the casual area as well.

At the same time, Grossman noted, Jones is hardly neglecting its career sportswear category. One expansion vehicle is through the newly purchased Evan-Picone label, which is priced 15 percent below Jones New York (and below comparable Liz Claiborne career clothes) and 15 percent above the Rena Rowan for Saville line. Evan-Picone's sales had eroded to $100 million, compared with $150 million three years ago. Company executives are hoping to regain lost sales within a two-year period.

The company is also seeking to further develop the Rena Rowan for Saville line of career sportswear, which is distributed in approximately one-third of the locations where Jones New York career sportswear is carried.

In another move aimed at growth, Jones opened a 200,000-square-foot facility late last year in Lawrenceburg, Tenn. The company also maintains a distribution facility at its headquarters in Bristol.

Jones's direction was not always as certain as it is now. In 1987, the firm did some product housecleaning, eliminating unprofitable businesses and licenses, like Gloria Vanderbilt, Norma Kamali and Regatta, and redefining its marketing focus on career and casual sportswear for working women.

Since 1988, Jones Apparel has racked up hefty yearly sales increases of between 16 and 36 percent. In 1991, Jones -- which was founded by its chairman and chief executive officer, Sidney Kimmel -- also took a big step financially and went public.

"Over the past few years, Jones became more focused and honed in on its core business, while Liz Claiborne embarked on a heavy diversification to includes shoes, accessories, men's clothing and other lines," said Slater.

Analysts pointed out that Jones had a difficult period last fall, when it started out pushing structured looks, which didn't take. But it quickly scrapped those looks in favor of softer silhouettes in the next delivery. Analysts said Jones's quick reaction to rectify merchandising mistakes gives it an edge over Claiborne, which they say has been slow to react fashion trends recently."Jones is a very nimble and a well-capitalized company," said Richard Lawrence, an analyst at Janney Montgomery Scott, a Philadelphia investment firm. A big reason is simply size -- Claiborne has more than 8,000 employees worldwide, compared to 1,500 at Jones.

But analysts pointed out that Jones's flexibility and quick response are due to other factors as well. For one, Jones sources 55 percent of its products domestically, giving it a short lead time, while Liz Claiborne sources much of its merchandise from the Orient.

In interviews with Wall Street analysts and former Liz Claiborne company executives, a picture emerges of Liz Claiborne as having "too rigid a corporate culture" and in an "identity crisis about who its core customer really is." "Liz Claiborne makes buying decisions based on committee," said one former company official, who did not want to be named.

A major concern among analysts and former executives at the company is the lack of a visionary at Liz Claiborne. Following the retirement of Liz Claiborne and Arthur Ortenberg, who was the firm's vice chairman, the key executive became Jerome Chazen.

Chazen, 66, chairman and chief executive officer, has been with the company since 1977, a year after its founding, but now no one seems to be in line to succeed him. Company officials would not talk about any succession plans.

In recent months, Claiborne has lost some key executives, most prominently Jay Margolis, a nine-year veteran, vice chairman of the board and a man who played a major hand in the company's growth. Margolis left last summer to head Pepe Jeans USA, which is owned by Apparel International Holdings Ltd. As reported, he will move over to Tommy Hilfiger, also controlled by Apparel International, as president and vice chairman on April 1 to develop a women's sportswear line. Claiborne lost another executive in January, when Robert Bernard, who was senior vice president international sales, joined J. Crew Group as chief operating officer.

"Liz Claiborne used to operate in a different way," said one former company official. "They used to be tuned into the customer. Either they have tuned out or they've just lost their customer."Claiborne officials have acknowledged some of these problems and have been scrambling to fix its sportswear merchandise. Some changes have been incorporated for fall, although company officials said it won't be until the spring of 1995 that the merchandise revamping will be fully evident.

As part of its merchandising strategy, Collections, LizSport and LizWear have been refocused, according to Linda Larsen German, who in December was named president of the sportswear division, succeeding Hank Sinkel, who became president for domestic corporate sales.

To get rid of overlapping, Collection will be mainly career-oriented skirts, jackets and tailored pants, and LizSport will handle casual clothes like cotton pants, sweaters and vests. LizWear will feature everything that's considered basic -- jeans, T-shirts and turtlenecks. Larsen German said the company is planning to keep prices generally even with last year's, but it is reducing certain items for fall.

To shorten lead times, Claiborne is working with Kurt Salmon Associates to improve its product cycle. Its goal is to cut its lead time by 10 weeks, as reported. The company is also producing knitwear samples in Brooklyn, rather than in the Orient. The company's traditional lead time is nine months.

While Larsen German acknowledged that Jones is a major competitor of Liz Claiborne's, she said there is room for competition. She also says she is heartened by the recent positive response from retailers to the new fall line.

"We have had a terrific response for fall, and we've definitely seen our accounts increase their buying," she said.

Ultimately, however, how the scenario between Liz Claiborne and Jones Apparel will play out depends on the customer. After one year of customers' snubbing the too-plain merchandise, Liz Claiborne is working hard to win them back, but they have to battle Jones to do it.

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