NEW YORK — William L. McComb, chief executive officer of Fifth & Pacific Cos., is stepping down after seven years at the helm. He will be succeeded by Craig Leavitt, ceo of Kate Spade. F&P will undergo a name change to Kate Spade & Co., to reflect the company’s monobrand focus.
It’s been a controversial tenure for McComb, who oversaw the transformation of the company, which was previously known as Liz Claiborne Inc. When McComb took over in November 2006, Claiborne had about 40 brands and $4.99 billion in sales. After a portfolio review, McComb quickly put 16 of the company’s brands on the block — including Ellen Tracy, Dana Buchman and Sigrid Olsen — and reoriented the firm around four “power brands,” which were Kate Spade, Juicy Couture, Lucky Brand jeans and Mexx. The firm, which last year generated about $1.3 billion in revenues and has a market capitalization of $3.96 billion, also sold its namesake Liz Claiborne brand to J.C. Penney Co. Inc., which had the license, and has since sold Mexx.
“All told, I was a wartime ceo,” said McComb, in a telephone interview Thursday. “Any of us that led our companies through that very rough time in the world.…We had our own travails that had nothing to do with the external market. You put those two together, and to hold a board together and to hold all the constituents like the banks and even the investment community, it’s not easy. Did we make mistakes? Sure, but there were also things we had to do.”
Following the sale of Juicy Couture and the completion of the Lucky Brand jeans deal this year, the company will be left with just one brand: Kate Spade, which generated $742 million in sales last year.
In establishing the company, George Carrara, currently executive vice president, chief operating officer and chief financial officer of F&P, will be promoted to president and chief operating officer of Kate Spade & Co. Deborah Lloyd will continue in her role as chief creative officer of the renamed company. In addition, the company plans to name Thomas Linko, presently chief financial officer and chief operating officer of Juicy Couture, as cfo of Kate Spade & Co., after the Juicy wind-down is substantially complete. Leavitt and Lloyd will join the company’s board. The corporate name change and management transition are slated to take place following the release of fourth-quarter earnings results on Feb. 25, at which time the company will begin trading on the New York Stock Exchange as “KATE.”
While the company didn’t detail McComb’s severance package, it does plan to incur a onetime, noncash severance charge of $16 million and cash severance charges of $7 million associated with the senior management transition.
In addition to McComb, others leaving F&P are Jane Randel, senior vice president, corporate communications, and Robert J. Vill, senior vice president, finance and treasurer.
Throughout his difficult tenure, McComb aimed to transform the company from a domestic wholesaler of women’s moderate and better-price sportswear to a firm that was primarily a direct-to-consumer retailer of global lifestyle brands. He narrowed the portfolio and expense structure so that resources were focused on high-margin, high-growth segments of the industry. The transition was often painful, McComb was frequently criticized, and the stock took a beating, especially during his early years on the job. At the company’s May 2008 annual meeting, for example, McComb defended the company’s strategy, which had included the elimination of 1,300 jobs, including 25 percent of its management positions. Despite disappointing earnings and a lagging stock price, Claiborne’s board members remained behind McComb and his plan and consistently dismissed growing speculation that they were questioning McComb’s performance. Rather, they attributed the missed earnings to inherited problems, changes in the wholesale marketplace and macroeconomic issues.
Speaking at the WWD CEO Summit in October, McComb recalled, “Those years — 2008, 2009 and early 2010 — were really dark days,” he said, noting that Claiborne’s shares fell to $1 and they were facing bankruptcy. McComb rode the waves, made several bold moves and remained consistent in his strategy to build companies that could stand alone. “Job one is to build value, job two is to study ways to unlock value,” he said in an interview last year.
McComb said Thursday that he’d been planning this move for awhile.
“I always viewed that my role would go away, when frankly, my work was done. The team that has brought the brand to this point can and should take the company over. There shouldn’t be a layer between Wall Street, the investment community and that management team,” said McComb. He said the concept has always been that any one of the three (Juicy, Kate Spade and Lucky) or all of the three would eventually go the way “of becoming their own brand. Juicy and Lucky will do that through the route of private investors, and Kate will go the public platform route,” he said.
McComb explained that when he hired the teams and had three independent companies “they were really incubators,” and he ran the three businesses very separately. “Each had the resources that they needed and each had their own independent challenges,” he said, noting that he didn’t view it as a horse race.
“It’s been an incubator that has grown and grown and grown and now it’s a full house. I think we have the operating platform and the operating culture [at Spade] to deliver on all this promised growth,” he said. In fact, at Kate Spade’s Investor Day last spring, Leavitt said he sees the Kate Spade brand as a $4 billion retail opportunity.
McComb pointed out that Spade “was really adrift,” when Claiborne took it over from Neiman Marcus in 2007. “It was small, and we didn’t have to strip it down to rebuild it.” The Lucky and Juicy brands were $500 million each, and almost all wholesale. “Converting those platforms at scale into retail businesses was very difficult,” he admitted. “Rare is it that you have an opportunity with such high growth and a long runway trajectory. That when you’ve got it, it’s basically a mandate from Wall Street,” said McComb, about the future of Kate Spade.
Leavitt added, “Bill hired all of us in 2008, and has been a great mentor for us as we’ve built this business seven-and-a-half times since that point. This is really a story about continuity. We are adding additional resources to the Kate Spade team. There’s continuity with an enhanced management focus.”
McComb said one of the high points of his tenure was learning a new business “while standing on the balls of my feet on hot planks.”
As for his future, he added, “I have absolutely no plans. Up until two in the morning last night, I’ve been up to my eyeballs in running this company and working on these things. I usually don’t go through the same thing twice, I’ve done consumer products, pharmaceuticals, medical devices and fashion and retail. Who knows what’s next? I have a big interest in venture capital and emerging companies. I like this whole incubating of companies, but we’ll see.”
When asked how he would assess his tenure, he said, “I’m really proud of it. All along we reassessed, we reacted and it was a crisis from the very beginning, in a way that I’m not sure the industry understood back then, and maybe they still don’t understand.” He noted that the legacy apparel brands, which were the first that he sold off, brought him a lot of criticism. “They were in fact pivotal to allow us to make the investments and to carry an expense structure that got us through the worst of the tough times. I think that the jury is in.”
McComb said he never had an activist in its boardroom. “It’s no secret our stock dropped from near $40 to a low on Nov. 20, 2008 of $1.65. That’s a stunning set of statistics.” But he doesn’t believe things would have unfolded differently if he had an activist in the boardroom. “We were the activists ourselves. I don’t think it would have changed,” said McComb.
After rising 1.5 percent to $31.86 in Thursday’s trading session, shares of the company dropped 2.8 percent to $30.98 in after-hours trading following the news of McComb’s impending departure.
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