By  on March 27, 2006

Some people approaching their 50th birthday might flirt with the idea of winding down their careers and buying a retirement home in Florida. Not Liz Claiborne and Art Ortenberg. In 1976, when they were 46 and 49, respectively, they started a sportswear company called Liz Claiborne Inc. Within 13 years, the publicly traded firm was generating $1.2 billion in volume and $110.3 million in net profits, and had arguably become one of the biggest success stories in the fashion industry.

When they walked away from active management in June 1989, Claiborne and Ortenberg were multimillionaires and ready to build a new career in philanthropy, having established the Liz Claiborne and Art Ortenberg Foundation in 1984. To date, the foundation has provided over $40 million in grants to numerous nature conservation, wildlife and educational projects around the globe.

With homes in Montana, St. Barth’s, Fire Island and Manhattan, the couple doesn’t appear to be pining for their hectic days running a fashion company, which they founded in 1976, and Fortune Magazine named as the second “Most Admired Corporation” in America in its 1986 survey (behind Merck & Co.) during their tenure. (It was one of many times the company would land on the list.)

“We got out at an extraordinarily good time,” said Ortenberg, 79, who was interviewed with Claiborne, 76, at their Fifth Avenue apartment here. Dressed in denim jeans and a white button-down shirt, Ortenberg, the former vice chairman, spoke animatedly about the early days of the company and their conservation projects. Claiborne, who was chairman and chief executive, wearing a gray turtleneck and pants and blue tinted glasses, also said her timing was on the money.

“I couldn’t take it anymore. I was supervising 32 designers and spending my time on the elevator going from one floor to another,” Claiborne said.

“Everybody would say, ‘Let’s run it by Liz,’” said Ortenberg.

“It had gotten so big,” she added.

Today, the Liz Claiborne brand accounts for $1.2 billion in annual sales, or 24 percent of Claiborne’s overall $4.85 billion portfolio, which isn’t exactly chump change. But the brand has been eroded over the past several years as several major stores have cut back or dropped the line. In addition, the corporation has diversified itself so successfully that the Liz Claiborne branded lines have become a less significant part of its overall volume.They admit it was during their tenure that the brand became oversaturated in department stores, and its point of view became diluted. Ortenberg said he would have preferred if the Liz Claiborne brand had “controlled distribution,” and hadn’t been as widely distributed as it was.

“We did not control it, so better stores dropped us,” added Claiborne, referring to Saks Fifth Avenue and Bloomingdale’s.

“It didn’t have to be that way,” said Ortenberg. He observed that Ralph Lauren has managed to keep an exclusive image for his flagship line and develop products around it. But, Ortenberg conceded, “Ralph is willing to give his entire life over to that. We aren’t.”

But back in the early days of building the company, the couple certainly gave it all their time and energy.

Ortenberg and Claiborne met in 1954, when he hired her to design Joan Miller dresses (a division of Rhea Manufacturing). Although they were both married to others at the time, they began an affair. “She was absolutely stunning and had an extraordinary taste level,” said Ortenberg. As he recalled, the owner’s son fired him when he learned of the affair and suggested he see a psychiatrist, but the son wanted Claiborne to stay. Claiborne said she told him, “If you fire him, I’m walking, too.”

They moved on to assorted textile and apparel firms, both underwent psychoanalysis, and in 1957, they married. Claiborne landed a job at Youth Guild, where she designed sportswear. Eventually, “Jonathan Logan wanted to get rid of Youth Guild, and I was running out of gas,” said Ortenberg. As a textile executive, he realized he wasn’t in a growth industry and was having trouble selling his acetates, tricots and home sewing fabrics.

In 1975, they spoke to Claiborne’s uncle, Albert F. Milton, who suggested that she and Ortenberg go into business together; he would give them seed money. So Ortenberg headed to Broadway Stationery, bought a business accounting book and wrote a three-year business plan. They drove to Uncle Albert’s house in Washington, Conn., and showed him the plan.“He was looking for a tax loss,” said Ortenberg.

After Uncle Albert gave them the initial investment, Claiborne contacted Joe Gaumont, a knitwear manufacturer, for whom she moonlighted, who agreed to fork over $50,000, and two of Ortenberg’s former Canadian clients also invested. They turned Ortenberg’s consulting space at 80 West 40th Street into a design room and showroom, obtained credit and took out a classified ad in WWD for a production executive who was experienced in quality goods, which landed them another partner, Leonard Boxer. He invested $25,000, the same amount Claiborne and Ortenberg each invested; they had raised $255,000. The company was incorporated in February 1976.

“Leonard was so critical in setting up our factories in the Orient,” said Ortenberg. “We were the first people to turn out high-value merchandise in quantity because Leonard went to the Orient.”

Ortenberg said at first, he was having difficulty producing sweaters domestically, and two-thirds through the first year they went offshore.

During his tenure, Ortenberg was an outspoken proponent of free trade and used to consider working conditions when choosing factories.

“We used to say there were worse factories in Brooklyn than in the Orient,” said Claiborne. Ortenberg said at one point, he attempted to start a factory in Chinatown, but it didn’t work out. “We lost a great deal of money on simple merchandise,” he said. Ortenberg said he paid a fee to the union, and then paid penalties when he didn’t use domestic factories, but still, it was a lot less costly than producing in the U.S.

From the get-go, Claiborne had a clear idea of what she wanted to design.

“The concept was to dress the American working woman because I, as a working woman with a child [from her previous marriage], didn’t want to spend hours shopping. Things should be easy. You don’t have to dress in that little navy blue suit with a tie. I wanted to dress her in sportier clothes and colors,” said Claiborne.

When Ortenberg and Claiborne showed their first fall line to Dottie Kaplan of May Co. in 1976, Ortenberg said she told them, “You have very nice stuff, but your prices are much too high.” Ortenberg thought he was supposed to have 45 percent markup, so they sat down and reworked the prices. They soon realized “it’s not the going-in markup that counted, but the coming-out markup that counts.” They decided to go in with a low markup, run a tight overhead and control inventory, and thus the differential was very little. “The company was built on that concept of value,” said Ortenberg.Claiborne was an instant hit at department stores. At the time, the better area of the store was Jones New York “which had higher armholes,” said Claiborne, and Evan-Picone, “which was mostly flannels and linens.” Ortenberg noted that Irving Spitalnick, president of Evan-Picone at the time, couldn’t have been nicer to them. “He never took us too seriously,” said Ortenberg.

Claiborne said she’ll never forget when Ellen Daniel, a buyer at Saks Fifth Avenue, called her at home at 7:30 a.m. when she heard she was going into business.

“Whatever you make, I’m going to buy it. And I’m going to run the first ad in New York,” Claiborne recalled Daniel telling her. Ortenberg added that Max Garelick, who was merchandise manager at Saks, even told him that if they needed it, he would pre-pay the shipment to Saks. Stores such as J.L. Hudson were among the first customers.

One of their biggest thrills, they recalled, came in 1976. The couple went out on a Saturday night and bought the Sunday New York Times. As promised, Saks had taken out the very first full-page ad highlighting a fitted Liz Claiborne white flannel double-breasted jacket and pleated skirt.

“It was the beginning of the growth of the so-called better area. It helped them [department stores] solidify a better department, and it complemented the Evan-Picone look in many ways,” said Ortenberg.

In the first year, Claiborne generated $2.1 million in wholesale volume, and the company was in the black by September. “Liz and I and Leonard drew no salaries,” said Ortenberg.

In April 1977, Jerome Chazen — who had been Ortenberg’s roommate at the University of Wisconsin — joined the company, and they offered him a full partnership, although he didn’t put up any money. One investor, David Green, asked for his money back then, and they gave it to him. They haven’t spoken to Green since.

Ortenberg said the four partners had a great arrangement. “Jerry was totally in sales, I was in operations and finance, Liz was design and Leonard was production,” said Ortenberg.“Art always had the vision,” said Claiborne. “I thought we’d be a nice little company.”

Although his background didn’t foreshadow that someday he’d hit it that big, Ortenberg said, “I saw it as a three-dimensional chess game, with the chutzpah that if you really worked at it and you had a strong capital base, you could defeat scale. But nobody has done that.”

He said there were two ways to approach the business after reaching such a large scale. “Paul Charron [current chairman and ceo of Claiborne] broke it up into all sorts of brands — or as Ralph Lauren did. He made the brand so powerful, he could sell things under it. What Ralph Lauren has done takes tremendous supervision,” said Ortenberg.

Reflecting on the early days, he said, “We had wonderful systems. We had a group of young people who were ferociously brilliant and energized. We would go to Hong Kong, and people would get out of the way. Having never gone to business school, I considered business school graduates dolts and traditionalists.”

For the most part, Ortenberg and Claiborne weren’t looking to expand beyond the namesake brand, but they did develop a bridge division under their knitwear designer’s name, Dana Buchman.

When the company was in need of a knitwear designer, Claiborne advertised for the position. “Dana [Buchman] came, and I knew I would hire her,” said Claiborne, who liked her background. “The only problem was that she wanted to fly first class to Hong Kong, and I told her I’d think about it.” But as soon as she left the office, Claiborne called her right back in and hired her.

“A lot of effort went into teaching Dana pattern-making,” said Ortenberg. Claiborne said they never considered using Claiborne’s name for a bridge line, and when they decided to expand into bridge, they thought it was a good idea to go with Buchman’s.

“It’s easy to work down,” said Claiborne. “It’s very hard to work up. If you’re Ralph Lauren designer sportswear, it’s easier to do a secondary line and a jeans line. To work up, it’s not easy.”Ortenberg felt it added to the company to have another person who could front a line. “It was wonderful having another name with a body behind it who could be on the road. Liz’s strength is going on the road, and getting into the dressing rooms with her customers, and what you learn about your goods when you travel,” said Ortenberg.

“Dana does that very well. She’s charming and personable. Liz did it beautifully,” said Ortenberg.

In fact, Claiborne said she sometimes would go into the dressing rooms pretending to be a salesgirl and would tell the customers how to wear the clothes. Later, she’d tell them she was Liz Claiborne. She used to go on four big trips a year visiting stores around the country and would have early breakfast shows for the sales force.

As legions of women were entering the workforce at the time, Claiborne hit on a concept that resonated with them. But not everything Claiborne designed turned to gold.

“Some years I missed the boat, especially with miniskirts versus maxi skirts. I didn’t think we were ready for miniskirts, and bingo, while we were in production, the ones that could be chopped off, we did,” said Claiborne. “We planned nine months in advance. We had to cover quota and production space,” explained Ortenberg. “When structured jackets weren’t popular, we still had a jacket factory that had to be fed,” added Claiborne.

What initially put the company on the map was velour tops.

“Velour is what made us in the early fall of 1976. We made velour shirts with drawstrings. Somehow, we don’t know why, we didn’t make velour pants,” said Claiborne, referring to the success of Juicy Couture, now a division of Claiborne, has had with its velour track suits.

“I wear Juicy Couture all the time,” she added.

Observers believe what set the company apart in the early days was the creative atmosphere and camaraderie among management and employees. Ortenberg said he tried to create a socially democratic atmosphere where management knew every employee’s name, and inquired about their families.“I went out of my way to make the ambience full of flowers, and white everywhere,” said Claiborne. “All our sample rooms were in New York, and they had the same plants and flowers. The lowest-level patternmaker was on par with the highest salaried executive. The company was run that way. When we had doors, they were glass doors. I don’t think I ever had a door.

“We had a company with no reserved parking spaces, no executive dining hall, management didn’t have a clothing allowance — and top management didn’t make a fortune,” she added.

“We had an old-fashioned view,” said Ortenberg. “Left to our own devices, we might have run it into the ground.”

One area that never really worked for Ortenberg and Claiborne was opening their own stores. In particular, they said the First Edition stores, which carried a less-expensive version of LizSport, were a mistake. “It really had no reason for being,” said Ortenberg. Claiborne said the Liz Claiborne stores weren’t successful from the beginning, either. The only ones that did well were in New York and Washington, D.C.

Ortenberg attributed the poor sales to the fact that they didn’t have the merchandise variety.

“They could get more variety at department stores,” said Claiborne.

Besides co-op ads, Claiborne never spent any money advertising its own apparel collections. In fact, the company didn’t start advertising its apparel until 1992, when it launched a $6 million campaign.

“It’s just as well,” said Ortenberg. “Once we started talking about advertising, we all thought so differently.”

“I wanted to,” Claiborne recalled.

“We didn’t need any advertising,” Ortenberg countered.

Even toward the end of their time at Claiborne, Liz became unhappy with the way the various lines were turning out. Although the dress and accessories divisions were successful, some of the looks she really couldn’t swallow, she said.

“We had no complaints when you look at the numbers,” said Ortenberg. He said that in the beginning, everything designed under the Liz Claiborne name had the same feeling, but over time, that changed and the various lines didn’t reflect Claiborne’s fashion sensibility. The designer said she received complaint letters from customers.Once the company became successful, the partners needed to come to terms with how they were going to spend their philanthropic dollars. “Each of the partners had X amount of money to give. Jerry and Leonard wanted to give it all to UJA [United Jewish Appeal], and we didn’t,” said Ortenberg. He said the company had given a fair amount of money to battered wives, but Ortenberg and Claiborne wanted to do other things with the money.

Ortenberg felt that starting the Liz Claiborne Foundation “legitimized us to some extent.”

“We started in such a threadbare way. Our customer relations department was me taking letters of complaint home at night,” he said. Ortenberg said he’d call people on the telephone, and if someone told him that she had received a blouse with a button missing, he told her to send them the blouse and they’d sew on the button; but the customer usually said, “Just send us the buttons.”

While some married couples might find it impossible to work together, Ortenberg and Claiborne said they had an easy time.

“We respected each other’s talents. I certainly respected Art’s financial and management skills, and he respected my talents, although he’d sometimes try to box me in,” said Claiborne. They often found themselves working around the clock, and bringing work discussions home. “We continued after hours. We’d go to Monte Rosa for dinner and we’d bring employees with us. We’d talk ’til 1 a.m. It was very much a family of hunting dogs. An alpha male and an alpha female.”

When the company decided to go public in 1981, they never looked back. Sales that year had reached $117 million and profits were $10 million. Ortenberg said he spoke to Merrill Lynch and it thought Claiborne could do better than four times earnings. “Jerry and I were supposed to go on the road, but then Jerry’s dad died. I was up until 3 a.m. rehearsing possible questions. We had such a terrific story to tell. A husband and wife. Our return on investment was quite staggering.”

The price of Liz Claiborne stock was set at $19 a share on June 8, 1981. The stock offering included 345,000 shares sold by the company and 920,000 shares by shareholders. These holders included the four principals, in addition to nine smaller investors. Each of the four principals sold 153,689 shares, reducing their individual stakes in the company from about 16.7 percent to 10.7 percent. They each received checks for a little under $2.6 million and the company’s net proceeds were $5.7 million.The next year, the stock split 3-for-2 as profits skyrocketed about 40 percent and sales increased to $166 million. Substantial growth continued quarter after quarter and year after year, and by 1987, Claiborne topped $1 billion in sales — a mark that had never before been achieved by a women’s fashion apparel maker. The company earned $114 million that year, and because of a series of splits, the number of shares outstanding had grown to 87 million. Five years later, the $1 billion in sales had doubled, and in 1992, they had shot up to $2.2 billion.

While the company was growing, stock splits occurred one after another. After the 3-for-2 split in the first year, there were four subsequent 2-for-1 splits. There was one in 1983, another in 1984, a third in 1986 and a fourth in 1987. One hundred shares purchased at the initial offering price of $19 a share would have become 2,400 shares.

The couple reduced their holdings periodically after they withdrew from active management in June 1989. According to the firm’s proxy statements, the Ortenbergs each owned 2,402,816 shares of Claiborne stock as of March 1, 1989, but as of March 16, 1990, the figure had dropped to 750,000 shares each.

In one spate of action from Feb. 27 through March 16, 1990, a move that caught Wall Street’s eye, Claiborne and Ortenberg each sold 1 million shares — 400,000 shares of which were sold on behalf of their foundation. Prices ranged from $21 to $23.50 for an average of $22.79 a share, or $45.6 million.

Ortenberg said they sold all their stock once they retired from the board in August 1990 to fund their foundation. “We had a different view of things than Jerry [Chazen] and many members of the board,” said Ortenberg. Claiborne added, “Jerry always thought mass, and get as many customers as possible because volume was the important thing.” Upon Ortenberg and Claiborne’s retirement from active management, the company’s sales for the fiscal year ended Dec. 31, 1988 were $1.2 billion, up from $1.05 billion the prior year. Earnings dipped to $110.3 million from $114.4 million.One of Ortenberg’s chief complaints with the board was that he had objected to buying back its own stock and thought it was “very lamentable that the best thing they could do with their money was buy their own paper.”

“There was not a company that had the earnings record we had. From 1978 to 1988, we had the highest return on investment of any Fortune 500 company,” said Ortenberg. In April 1989, Fortune Magazine rated Claiborne as having the highest return on year-end equity over a 10-year period of any Fortune 500 industrial company. Its average return on equity was 40.3 percent.

“The board members felt that they should be buying back stock to enhance shareholder’s value,” he said. “Liz and I were in Peru and we got a phone call that the board was meeting, and they were going to vote in favor of buying back the stock. We told them to wait until we got back, but the decision was made.” Ortenberg said there were so many options the company had at the time in terms of growth, such as expanding the computer system and the European operation. But he recalled that in 1988, there was a recession, so perhaps it was the right thing to do.

“When we left, we left. Nobody asked us to come to a board meeting,” Ortenberg said.

Upon their retirement, Chazen became ceo and Jay Margolis was vice chairman. Margolis left in 1993, which displeased the couple. “We liked Margolis. He had an eye for the goods and he had taste,” said Ortenberg. Ortenberg said he hasn’t spoken to Chazen, who retired from the company in May 1996, in a long time. “We really have nothing in common. There were intervening years in which the company changed, and its history changed.”

They don’t have many kind words about what has happened to the Liz Claiborne brand since they retired, either.

“I was very proud when the name was all over the place. [Now] it’s like a poor step-child,” said Claiborne. “My only ill feeling is what happened to the name, and that part of their philosophy was to make that a very small portion. The goods got so cheap looking and so unappetizing.”Liz Claiborne obviously seems to be more disturbed about what happened to her brand than Ortenberg is; he acknowledged that once a namesake leaves, a company has to do whatever it can to survive and flourish.

“I agree that if a company is named after a person, and if that person is not going to participate and be visible, then the person becomes very unimportant to you. You have to make that name work,” said Ortenberg.

Claiborne said she doesn’t really think it’s possible to build the kind of company today that they created in the late Seventies and Eighties.

“They can’t do it on a shoestring the way we did it. There doesn’t seem to be a mind-set for it. Designers don’t have proper partners. First of all, you should have three other partners. I don’t know anything about finance. I hate selling. I know how to sew, but don’t know production. I don’t know how to structure a company. If you have three other partners who are very good at their jobs, it’s a leg up,” she said.

While they were still involved in running the company, Ortenberg and Claiborne took a trip to Banff in Canada, which sparked their interest in conservation issues.

“I was in California doing shows, and Art flew out to meet me to go to Hong Kong, but the trip was canceled. We’d heard about Lake Louise and we checked into one hotel, and [quickly] checked out.” The taxi driver took them to a Travel Lodge in Banff, and they stayed in the bridal suite. “We spent our days with backpacks and hiking. I realized I really like that kind of thing,” said Claiborne.

At the urging of Wildlife Conservation International, they took a trip to Africa in 1984. “On the first morning of our safari, I got up early and there was a huge plain. The giraffes, elephants and the gazelles made a wide screen for me, and I said to myself, ‘I’ve got to help save these things.’”

“Having gone public in 1981, we had some funds,” said Ortenberg.“It was kind of an epiphany for me. We had cats, but we were so busy with the company, we couldn’t take care of them and we gave them away,” added Claiborne.

These days, Ortenberg and Claiborne spend three-and-a-half months a year in Montana. During the summer, they go back and forth between Manhattan and Saltaire, Fire Island, and in the winter, they travel between the city and St. Barth’s. The couple devote a great deal of their time to their foundation, which has funded dozens of conservation management and educational programs in places from Montana to the Congo, Kenya, Madagascar and Belize, as well as provide grants to protect such wildlife as the elephants in Africa, tigers in India, penguins in Patagonia, antelopes in Tibet and jaguars in South and Central America.

What has put a crimp in their globe-trotting lately is the fact that Claiborne needs to be in Manhattan every two weeks for cancer treatments. For the past eight years, she has been fighting cancer of the omentum, (a fold of the peritoneum, the thin tissue that lines the abdomen.) “We caught it very early, but it keeps coming back,” said Claiborne.

While she still follows fashion and enjoys reading fashion magazines, she’s not as consumed by it as she used to be. When she first retired, she used to wear Ralph Lauren, “but it doesn’t fit me. I’m tired of buying stuff that’s expensive,” she said. She likes Emporio Armani and shops at Banana Republic. She used to wear more J. Crew and bought it from the catalogue while she was in Montana, but it doesn’t fit her well anymore. She sometimes wears DKNY. “They have good-fitting pants,” she said.

Mostly, she spends her days in St. Barth’s doing “a lot of reading, catching up on books, puttering around the house, answering e-mails.” But she’s not doing much cooking. “Art likes to go out to eat every night. We go to Maya’s every night,” she said. And she’s about to become a grandmother for the first time. Her son, 51, and his wife, 39, are expecting their first child in June.Unquestionably, the company provided plenty of professional and financial opportunities for the couple. Although Claiborne didn’t graduate from high school — she studied fine art in painters’ studios in Brussels and Nice — she received an honorary degree from the Rhode Island School of Design in 1999. She was also the first woman ceo and chairwoman of a Fortune 500 firm. In 1986, Claiborne was honored by the Council of Fashion Designers of America for her ongoing distinction as an American designer, and in 2000, she received the CFDA’s Humanitarian Award for the work she and Ortenberg have done through their foundation. In 1990, Ortenberg and Claiborne were inducted into the National Business Hall of Fame.

The couple are quick to acknowledge that as much as they loved and benefited from the company they started, and enjoy reminiscing about the early days, its future was entirely out of their hands.

“The whole business of thinking you can perpetuate something is fool’s currency,” said Ortenberg. “The minute you slam the doors behind you, all hell breaks loose.”

To access this article, click here to subscribe or to log in.

load comments
blog comments powered by Disqus