By  on February 23, 2009

Liz Claiborne Inc. is turning over its sourcing to Li & Fung Ltd.

To improve margins and speed to market, the $4 billion vendor is entering into a long-term exclusive buying agency agreement with Li & Fung, making the Hong Kong-based firm the primary global apparel and accessories sourcing agent for all brands in Claiborne’s portfolio. Except for jewelry, which will continue to be made by PBMS for now, those brands include Juicy Couture, Lucky Brand, Kate Spade and the relaunched Isaac Mizrahi-designed Liz Claiborne New York line.

Upon completion of the deal, expected in the first quarter so Li & Fung would begin sourcing on April 1, the company will pay Claiborne $75 million, plus up to $8 million within 14 days of completion. Going forward, Claiborne will pay an agency commission of its product purchases through Li & Fung. Claiborne said it would give more financial details on its earnings call next week.

Of Claiborne’s Asia-based sourcing jobs, 250 will move to Li & Fung and 225 will be eliminated.

“In this kind of economy, we need to have the best possible executional foot forward,” said Claiborne chief executive officer William L. McComb. “This is the kind of environment in which you have to reevaluate where you allocate resources.”

The deal follows the Nov. 11 announcement that Li & Fung would take over sourcing for the Claiborne-owned Mexx, which will continue under this agreement. At the time, McComb said he did not foresee giving other areas of the vendor’s sourcing to Li & Fung.

“Our relationship and courtship of each other began all the way back in the strategic review process [in August 2007] when they bought the moderate brand portfolio, which is what sucked us in,” McComb said. “The second step was giving Mexx Canada the ability to work with Li & Fung on a certain percentage of the Mexx line, then we took it a step further and gave Li & Fung the European Mexx. At each step, we were so impressed, particularly by how much improvement we saw in Mexx so quickly. There was no way I would have done this all at once.”

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