By  on September 14, 2007

Liz Claiborne Inc. has completed Phase One of its strategic review. Now onto Phase Two.

After placing 16 of its brands under review on July 11, the $4.99 billion vendor has settled the fates of its seven moderate brands: selling Emma James, Tapemeasure, JH Collectibles and Intuitions to Li & Fung USA, a subsidiary of Li & Fung Ltd.; folding Stamp 10 and Tint into its Axcess and Liz & Co. lines, and shuttering First Issue.

"This shows that within a strategic review, a number of things can happen," said Roberta S. Karp, senior vice president of business development, legal and corporate affairs, at Claiborne. "Some of these were exclusive brands with department stores, and we wanted to give certainty to our retail partners as to what they would be doing in spring. Now we are focusing on the better and bridge brands."

The next step for Claiborne is to sell the nine higher market brands — Prana, Enyce, Laundry, Sigrid Olsen, Dana Buchman, Ellen Tracy, C&C California, Mac & Jac and Kensie — which it had been holding off on until the fates of the moderate labels were settled. Karp said the company divided the brands into Phase One and Phase Two early last month.

"Dozens of qualified strategic and financial buyers have shown significant interest" in the remaining nine brands, Karp claimed, and the books are now going out and sales conversations are beginning. She doubts Phase Two brands will share the divided fates — being sold, folded or shuttered — as Phase One companies.

"We think most of these businesses will be sold, given the interest, but we will weigh that interest against our own interest as we continue to run them," Karp said. "It will depend on if we get the number we think is appropriate."

Claiborne will fold the denim-based Stamp 10 and Tint product into the Axcess and Liz & Co. exclusive lines for Kohl's Corp. and J.C. Penney Co. Inc., respectively, so that Stamp 10 and Tint will cease to exist as distinct labels.

The vendor decided to discontinue its First Issue business — a brand with a tie to the Liz Claiborne label — at Sears by the end of this year. "We had good conversations with our retail partners, and this seemed like an appropriate solution," Karp said, when asked if retailers had bid on the lines.The transaction with Li & Fung, for which the financial details were not disclosed, is expected to close in October.

Following its purchase of Regatta Pacific Alliance for more than $145 million last month, Li & Fung USA is continuing to build its proprietary brand portfolio with these moderate labels.

"Even though these brands may not have the status they had with Claiborne originally, we still think they have a presence with retailers," said Rick Darling, president of Li & Fung USA. "It's a segment that a lot of wholesalers are running away from, but that's the sweet spot of Li & Fung, that our model is all about being flexible. Brands a traditional wholesaler can't sustain with competitive costs may become our core. We are building a very different type of brand portfolio, as Liz Claiborne and our collaboration speaks to other collaborations that can take place in this marketplace. The days of all of us looking at each other as pure competition are changing."

Darling said he has been in conversations with Claiborne for the last 30 days, and his next move is to hold talks with retailers to build a brand platform and strategy. Li & Fung also is interviewing the employees of the four brands, with particular interest in the "front of the house and the back of the front of the house," as the supply backside houses the firm's strength.

He added that, although Li & Fung has not expressed interest in the Phase Two brands, the firm is still looking for ways to build its proprietary portfolio, so those conversations could still take place, though he thinks he would face far more competition than on the first round.

FACT BOX

- Tapemeasure had been around for 30 years, but took on a new identity in 2005, when Claiborne relaunched the label as a moderate-priced, trend-driven line.

- Claiborne created Emma James in 1996 as an entrée into the upper-moderate zone, but the brand got off to a rocky start, reducing from 225 doors to 100 in the first year. In 1998, Claiborne reduced prices about 10 percent and oriented it more to items and knitwear, and by 2000, door count was up to 700.- J.H. Collectibles was an important player in the better market in the Eighties with annual sales of around $100 million, but Claiborne bought the trademarks in 1997 at a bankruptcy auction. After a six-year hiatus, it relaunched in 2002 as a moderate label, targeting 35- to 65-year-olds who wore it during its heyday.

- Claiborne launched Intuitions as an exclusive for Dillard's Inc. in 2004.

- Stamp 10 launched last year as a denim-based exclusive for Kohl's Corp., which also has Villager and Axcess, which fall under the Liz Claiborne brand family umbrella, which the company kept.

- Tint launched as an exclusive denim brand in 2005 with J.C. Penney Co. Inc., which also has the successful Liz & Co. for women and Concepts by Claiborne for men.

- First Issue began as a chain of stores for Liz Claiborne, but the company closed the 77 units in 1995. The next year, it revived the label as a moderate-priced exclusive line for Sears.

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