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The McComb Manifesto will be revealed today and the new chief executive officer of Liz Claiborne Inc. is set to disclose that he is considering strategic alternatives for 16 of the vendor’s brands.
This story first appeared in the July 11, 2007 issue of WWD. Subscribe Today.
Ceo William L. McComb, who joined the $4.99 billion manufacturer in November, is prepared to conduct a strategic review of the brands, up to and including the possible sale, discontinuation or licensing of labels such as Sigrid Olsen, Dana Buchman, Ellen Tracy and C&C California, WWD has learned.
Sources close to the company said that the group also includes Laundry by Design, Enyce, Prana, Kenzie, Mac & Jac, Emma James, First Issue, Intuitions, J.H. Collectibles, Stamp 10, Tapemeasure and Tint. These mature brands, sold mostly through department stores, are estimated to total $800 million in wholesale volume for this year.
At the same time, McComb is likely to invest heavily in fast-growing “power brands” sold through company-owned stores, including Juicy Couture, Lucky Brand Jeans and Kate Spade.
McComb also plans to trim costs by a total of $190 million through 2010, including a reduction of as many as 800 jobs.
Claiborne expects to announce plans for all the brands by the second quarter of next year.
The reassessment represents a change in the company’s strategy following the 12-year reign of McComb’s predecessor, retired chairman and ceo Paul Charron. He built the firm from a $2 billion apparel business into a multichannel conglomerate with a portfolio of more than 40 brands. Many of the labels acquired or started during his tenure might be jettisoned.
McComb, former group president at Johnson & Johnson, is a marketer who has said since the beginning that he wants to streamline the company’s portfolio so it can invest talent and marketing dollars in the brands with the most growth potential. He has dubbed Kate Spade, Juicy Couture, Lucky Brand and Liz Claiborne power brands, and has reorganized the company to reflect their priority status.
Although some of the brands under review got on the list because of disappointing sales figures or product mistakes — including Sigrid Olsen, Dana Buchman and Ellen Tracy, which the company said have struggled in the last year or two — other brands got there because of McComb’s new strategy to make the portfolio less complicated and increase investment in the power brands.
Three weeks ago, McComb divided the company between “partnered brands” and “direct-to-consumer” brands — Juicy Couture, Lucky Brand, Kate Spade and Mexx. Direct-to-consumer brands are expected to deliver $2.2 billion in revenues this year, and partnered brands are projected to generate $2.8 billion, of which $2 billion comes from brands not under review, such as Liz Claiborne (which does about $1 billion in wholesale volume), DKNY Jeans and Monet, sources close to the company said.
McComb promoted group president Jill Granoff to executive vice president of direct-to-consumer brands, reporting directly to him. Claiborne president Trudy Sullivan was put in charge of the partnered brands, but a little more than a week later, Sullivan said she was leaving to become president and ceo of Talbots Inc.
All of the brands under review, besides Sigrid Olsen, fall under the company’s partnered brands division, which will be headed by new hire David McTague, previously president of Nike Inc.’s Converse brand.
In the next few weeks, the company is expected to hire a ceo for Kate Spade, reporting to McComb.
At an Investor Day meeting today for shareholders, analysts and the media, the company also is expected to announce cost-saving plans that will yield $100 million next year and an additional $45 million for both 2009 and 2010 — for a total cost savings of $190 million by 2010. In the face of a 65 percent fall in earnings in the first quarter, analysts have been clamoring for substantial cost cuts.
Much of the savings will come from eliminating between 600 and 800 positions — or 8 percent of Claiborne’s nonretail global workforce — this year. Many of the trims are to come at the senior level of the organization, which already has seen the elimination of the president and group president positions — some of the most veteran and highest-paid executives on the payroll. Some facilities will close, as well.
Much of the cost savings will be poured into specific growth plans for the direct-to-consumer brands (Juicy, Kate Spade, Lucky and Mexx), including opening more than 300 new stores by 2010 (to bring the total to more than 800) and expanding categories, outlet and e-commerce strategies, international growth (with wholly owned stores as well as partnerships) and big-dollar marketing campaigns.
The company is expected to give 2007 and 2008 guidance, as well. Claiborne is to tighten its full-year 2007 earnings-per-share range to $1.90 to $2.00, with adjusted net sales flat to down low-single digits, compared with last year. For 2008, the company will project full-year sales of $4.2 billion to $4.3 billion and EPS of $2.35 to $2.50.