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Claiborne, Rodriguez Terminate Partnership

In a joint statement made today, Narciso Rodriguez and Liz Claiborne Inc. said they are ending their 18-month-old partnership.

NEW YORK — Liz and Narciso are getting a divorce.

This story first appeared in the October 8, 2008 issue of WWD.  Subscribe Today.

In a joint statement made today, Narciso Rodriguez and Liz Claiborne Inc. said they are ending their 18-month-old partnership.

Rodriguez will regain full ownership of his business and inherent trademarks. Essentially, the termination of the deal with Claiborne will give the much-respected designer, who launched his collection in 1997 in a partnership with Aeffe SpA, complete independence for the first time.

While the tie-up with Claiborne was much trumpeted by both parties when it was unveiled in May 2007, giving the giant vendor the cachet of a major designer in its stable and Rodriguez the backing he needed to grow his brand, in the end the relationship just didn’t work.

“LCI and I had hoped there would be more synergies between our companies,” Rodriguez admitted to WWD. “We did not find enough common grounds and jointly have concluded that the Narciso Rodriguez brand could be developed more effectively outside of this partnership.”

Claiborne chief executive officer William L. McComb said, “While we both saw significant opportunities to develop the collection in multiple product categories, channels and geographies initially, differences emerged as to how best to achieve this organic growth, and we have decided to terminate our business relationship by mutual agreement. We have also seen dramatic changes in the luxury marketplace versus what we expected when we formed the alliance.”

Both parties declined to disclose financial details of the transaction, but there has been speculation that Claiborne is essentially handing the designer the 50 percent stake it acquired at a price estimated at $12 million. Claiborne is still working to determine the financial impact of the return of the trademarks, and will count the Rodriguez business as a discontinued operation in its financial statements. According to the statement, the nonrecurring cash charges will be insignificant to the company’s cash flow and noncash charges associated with the transaction.

The termination of the business relationship is widely believed to have been amicable, however. Claiborne will provide Rodriguez with the support to ensure a smooth transition, including the production and timely shipment of the much-praised spring collection.

Claiborne and Rodriguez formed their partnership after the designer’s lengthy — and well-documented — search for financial backing to unshackle him from his agreement with Aeffe and expand the business to match its potential.

Rodriguez has been a household fashion name practically since he created the bridal gown for the late Carolyn Bessette-Kennedy. He has a following among celebrities and social types such as Jessica Seinfeld, Sarah Jessica Parker, Rachel Weisz and Claire Danes. Jessica Alba, Danes, Seinfeld and Julianna Margulies were among the celebrities at his show in February.

But, despite his recognition, Rodriguez, like many of his contemporaries, has been challenged to grow his business to a size that equals his talent. Before finding a partner in $4 billion Claiborne, he was struggling to make ends meet, recounting to WWD last year how the fashion industry galvanized to help him, from Donna Karan sending over rolls of fabric to Ralph Lauren offering advice.

Claiborne eventually bought Aeffe’s stake in the designer’s business.

“We helped Narciso set up an operation independent of the Aeffe organization and separate of the Liz Claiborne corporation,” McComb said. “We also saw Narciso stretch and grow creatively with two major collections. We didn’t get as far by now as we had planned, however. Both sides would have liked to have achieved more.”

The termination of the partnership also could be seen as a symbol of the challenges of marrying a major fashion talent with the demands of a multibillion-dollar public company, particularly one that faces its own financial hurdles. Claiborne has been plagued by transition pains and has been posting losses. In mid-August, the vendor posted a loss of $23.2 million in the second quarter, narrowed guidance for the year and scaled back plans for retail expansion.

Asked what he learned from the partnership with Rodriguez, McComb said: “Opportunities like this partnership come with their own timing — in this case, a pressing urgency. Though our company was in the throngs of change, we believed it was important to evaluate and potentially act on innovative opportunities — opportunities that may, in fact, inform a longer-term strategy. That said, our corporate mission, strategy and priorities are clear now, and when our respective organizations’ increasingly divergent views on how to organically grow the Narciso Rodriguez brand became clear, terminating the partnership was in the best interest of both parties.”

As for the designer’s future, Rodriguez said he is looking forward to “this independent time,” while exploring several different options. “Our business is on target and we have full confidence in the future of the company,” he said. “We are also enjoying tremendous success with our fragrances and are now exploring various licensing opportunities.”

Rodriguez signed his fragrance deal with Beauté Prestige International, a unit of Shiseido Co. Ltd., in fall 2001. Since then, the deal has yielded a women’s and men’s scent — Narciso Rodriguez for Her, which bowed in September 2003, and Narciso Rodriguez for Him, which hit the market in July 2007 — as well as ancillaries to both fragrances. Industry sources estimated that Narciso Rodriguez’s U.S. fragrance business generates annual retail sales of more than $12 million. In the U.S., the scents are distributed in around 500 high-end specialty stores, including Saks Fifth Avenue. Rodriguez is said to be working on a new women’s fragrance, which could bow as soon as the spring.

According to Rodriguez, the company has been looking to hire a president “for some time,” and the search will continue.

“The spring collection was very well received,” Rodriguez said. “We feel quite fortunate in these challenging economic times that our retail partners have given us so much support and have expressed such confidence in the strength of our collection.”

And Rodriguez is already thinking beyond spring. “We are fully immersed in development of the early fall collection as well as the planning of the fall-winter collection,” he said.