NEW YORK — After a mere two months in the job, William L. McComb could be facing his first major crisis as the new chief executive officer of Liz Claiborne Inc. And it involves no less a customer than Federated Department Stores Inc.
Sources said the $22.4 billion Federated is miffed that J.C. Penney plans to launch the Liz & Co. brand throughout its stores, which Federated feels denigrates the Liz Claiborne brand. Starting this spring, the Liz & Co. casual line will be sold exclusively in all 1,021 Penney’s stores. Sources said Federated may be looking to cut back space for the Claiborne brand as the retailer focuses more on exclusive collections and its private label business — or it could drop Claiborne’s licensed products.
When asked in December about whether Federated was considering dropping the Liz Claiborne brand, McComb responded, “You would have to ask Federated, but I would be surprised if that was the case because it is a longstanding and important relationship for both of us.” A spokesman for Federated said, “Liz Claiborne will continue to be an ongoing brand at Federated,” but declined to comment further.
The industry will be watching closely as to how the new ceo uses his marketing background, resounding optimism and team-building philosophy to deal with Federated’s pique — and the impact it will have on the company’s core Liz Claiborne brand, which has been struggling for several years. McComb, who previously was a group president at Johnson & Johnson, finds himself in one of the highest-profile jobs in the apparel industry at a time when retail consolidation, private label and changing consumer preferences have left vendors scrambling to adapt.
The Liz Claiborne brand makes up about a quarter of the parent company’s sales, and after the brand reported about 19 percent year-over-year declines for 2005, analysts worry — despite a new designer and a stepped-up marketing campaign that are starting to yield results — that the manufacturer’s flagship brand may continue slipping.
But McComb holds up the Claiborne label as a model for how marketing can reenergize a product, with its new design team and heavily promoted “Liz Is” campaign. And as a brand builder and marketer, McComb is ready to lead more such initiatives.
“Marketing is a great card to be played,” McComb said. “There are places where we haven’t used marketing to play the role it should. Liz Claiborne is a key example. I have a lot of energy for doing a lot more of that [type of makeover campaign]. As a real marketer, name any one of our brands, and I will tell you there is a real opportunity.”
As for other subsidiaries, McComb cites Prana and Kenzie as brands that could benefit from a fresh marketing campaign. He considers Mexx a success abroad and dismisses what some see as failure closer to Claiborne headquarters. In the States, 11 Mexx stores opened initially but only four now remain, primarily in street-based urban areas, as opposed to mall locations. “Our emphasis has not been the U.S. market,” McComb said. “We have not launched Mexx here yet or turned on the marketing.”
Mexx may be getting that marketing attention under McComb, as will the newly acquired Kate Spade, which promises to receive the care at Claiborne that it missed out on while owned by Neiman Marcus.
“There is a very strong vision at Kate,” McComb said. “We like the affordable luxury segment. We like that it is anchored in accessories. We like that it has [customer] permission to do apparel. We like that it can grow retail and direct-to-consumer segments.”
But as it expands, don’t expect to see Kate Spade diffusing its products and going the way of Very Vera, an exclusive line Vera Wang is launching with Kohl’s for fall. “We want to blow out the market segment it is in. We didn’t buy it for a passage into another place,” he said of Spade. “We will be true to the brand idea.”
McComb points to Kate Spade, which Claiborne acquired in November, as proof the group can compete with private equity and other manufacturers in acquisition mode. “We are the guys who did it first,” by buying such brands as Juicy Couture, said McComb.
It’s hard to tell if he’s as acquisition-happy as his predecessor Paul Charron, but McComb is certainly looking. As head of Claiborne, he will continue to acquire companies that can do four things: “build brand platforms, bring capabilities, expand internationally and even own retail.”
And in a clear reversal of the buy-buy strategy of his predecessor, McComb is not adverse to shedding brands that do not make the cut, though he said he has not identified any so far. “A good strategy is to acquire and divest. Anyone worth their salt would say that,” he said. “Obviously, we don’t want to shrink our way to greatness, though.”
Besides those general business strategies, two months into the job, McComb has no set agenda, and he said he does not plan to until at least June, if not later in the summer. “2007 is what we would call a transition year,” he said. “I think it is a mistake for a new ceo to be led into a 90-day change agenda. Those same analysts who look for that will punish you for it later.”
Instead, he is doing lots of listening. He said he’s been meeting with employees at all levels (stopping by their offices instead of calling them into his), with customers, with founders of companies Claiborne has acquired, with retired industry veterans and even with management who have left.
In short, he’s not afraid to admit he has a lot to learn before he publishes the McComb manifesto.
Some of his ideas for the future of Claiborne may come from his very first job. The industry outsider is eager to show he is “the horse for the course” — a favorite expression — to head the company, so in addition to talking up his background as a brand builder and marketer, McComb, 44, reminisces about his glory days fresh out of Miami University of Ohio when he worked for a year as a shoe department head at Lazarus. He even talks like a garmento — a highly educated garmento, mind you.
“If you work in a department store for one year, the language never leaves you,” McComb said. “But I left that world then.”
After his brief retail stint at Lazarus, McComb got his M.B.A. from the University of Chicago Graduate School of Business. Post-grad school, he worked at Leo Burnett in Chicago, handling advertising for Procter & Gamble. In 1992, he began his career with J&J as an assistant product director, the first position in a trajectory that took him through the ranks at the pharmaceutical company.
Tony Vernon, retired company group chairman at J&J, witnessed McComb take over four different J&J assignments. Vernon said he met McComb in 1995 at a cocktail party for rising stars at J&J, when McComb was the head of the Clean & Clear brand, and Vernon took McComb with him as they climbed through the company. “I recruited him away from that job for the Pepcid launch because I was so impressed by him,” Vernon said. “Leadership leaked out his body — it was just so apparent.”
In 1995, McComb joined J&J•Merck as group product director. He moved to the McNeil Consumer Products Co. division and was named its vice president of marketing in 1999. In July 2001, he was tapped as president of McNeil Consumer Healthcare, and three years later he assumed additional responsibilities as president of McNeil Consumer & Specialty Pharmaceuticals and Ortho Women’s Health & Urology. Then in April 2005, he took over as a company group chairman of J&J, responsible for the DePuy business.
“Businesses do well from having eyes from other industries — that’s the promotion philosophy of Johnson & Johnson,” McComb said. “There’s something to be said for being kicked out of your comfort zone. But I have learned that all businesses are alike and face the same kind of challenges. You’d be surprised at how much business is like business.”
That’s been McComb’s mantra since taking the top job at Claiborne in November — and more likely for his entire career. He said the Claiborne board first contacted him in spring 2006, courted him over the summer while he was frequently overseas for business, solidified the relationship in the fall and then finally announced his appointment Oct. 16. He took over on Nov. 6.
“Both the board and I were extremely careful and took an extremely long time in choosing,” McComb said. “I had begun to get calls about running a company on the outside a few years ago, and in my mind, I made the decision only to go for a company that had the same rock-solid principles as Johnson & Johnson. I got the call to meet the board at Liz Claiborne, and the lights went off. The board swept me off my feet with their vision for the company. I was probably a surprise for them, but the board looked past the industry.”
Kay Koplovitz, a longstanding Claiborne board member who took over as chairwoman on Jan. 1, said the courting process “was conducted at a measured pace, as there were several candidates given careful consideration.” She added, “Ultimately, Bill stood out as the leader we sought to refine the company’s growth strategy, unlock the talent within, identify new market opportunities and drive growth for Liz Claiborne Inc.”
In addition to his “inclusionary management style” and enthusiasm, the board saw McComb’s J&J experience as an asset for the apparel giant. “During his tenure at Johnson & Johnson, Bill oversaw some of that company’s largest, most successful consumer product businesses and brands,” Koplovitz said, “and he brings valuable experience in the areas of brand-building, consumer marketing, especially to women, international and supply chain.”
McComb’s tenure at J&J was less about pharmaceuticals and more about marketing and management, contend those who know him.
“Tylenol is not just a health care product. It is one of the iconic brands in America,” Vernon reflected. “Bill believes in creating enduring global brands. He doesn’t believe in mature brands — it may be tired marketers. The strength he brings in brand building translates well across industries.”
McComb does not consider himself a pharmaceutical guy. Or a drug guy. Or a fashion guy, for that matter, though he has always liked fashion. He confides his high school senior class voted him Most Stylish. Today his penchant is for British labels — Thomas Pink, Paul Smith, Ted Baker — as he fancies the bold colors and patterns, plus the slim fit suits his frame, which he vigilantly keeps trim since he spent years devising warnings for pharmaceutical packaging and dealing with the medical world.
But for his portrait as the new maestro for one of fashion’s biggest firms, McComb chose to wear the company line: a Claiborne navy pin-striped suit and a cream-colored ribbed turtleneck.
“I love to shop, and I have always. I love going to drug stores, grocery stores, mass merchants. I shop at Macy’s, Neiman Marcus, Bloomingdale’s, Saks. I shop it all,” McComb explained. “I’m an aesthetic guy. I love art. I love a beautiful home. I love buying jewelry for my wife.”
The house in question is in Bucks County, Pa. The jewelry recipient, Marianne McComb, “was already on board with many of the brands and is especially excited about Prana,” McComb said of his spouse, a writer of school textbooks. For their part, the three McComb boys (ages 13, 15 and 18) “are oblivious, though they are really into Lucky Jeans.”
McComb himself is excited about the people and the business possibilities of breathing new life into a company some fear is in danger of becoming “mature” — a deadly word in the industry.
In his first week on the job, Claiborne held an off-site leadership meeting, where McComb asked everyone there to send him a note about the company’s strengths and challenges and how they could personally contribute. McComb said he printed every e-mail and carries a bound book of them with him everywhere to read on the train or whenever he has down time. “There is a lot of power in that book,” he said. “It leaves me really optimistic.”
That optimism comes when it clearly is most needed. Claiborne’s 40 consecutive quarters of growth ground to a halt last year. For the first nine months of 2006, net income dropped by 24.1 percent to $181.5 million, or $1.75 a diluted share, from $239.1 million, or $2.20, a year ago. Sales rose by 0.5 percent to $3.67 billion from $3.65 billion.
Turning those numbers around to win back Wall Street may be McComb’s biggest challenge, but keeping key employees on board is also important, said Brad Stephens, an analyst for Morgan Keegan & Co. Inc. “Is there going to be turnover there?” Stephens said. “If problems happen and they start to lose people at the top, investors will be very concerned.”
Before McComb joined the firm, which he calls “the training academy for the industry,” many of its leaders already had been poached: Angela Ahrendts resigned as executive vice president in October 2005 to head Burberry; Gail Cook, group president of bridge brands, left in 2004 to start her own consulting firm and then was named president of Kellwood’s David Meister brand; Denise Johnston, president and chief merchandising officer for the better and moderate division, left to become president of Gap Adult in April but left Gap on Friday, and Bob Negrón, a group president at Liz Claiborne Inc. for more than seven years, resigned his post last June to pursue other interests.
But there is one employee today who stands at the top of the list of those McComb wants to keep: Claiborne president Trudy Sullivan, who has the merchant skills McComb lacks and who was said to be the inside candidate for the ceo post.
“He’s there to be a leader. He’s not a merchant,” Stephens of Morgan Keegan said. “The concern I have is that he is not a merchant. In the apparel industry there are a lot of gray areas, and the concern could be that he sees in black and white. If that does prove to be correct, people will start screaming, ‘He is not a merchant.'”
McComb is quick to sing Sullivan’s praises and, by all accounts, has been nurturing his relationship with his second-in-command. “Our skills are so complementary,” McComb said. “Certainly, she has skills as a merchant that I will never have. But our leadership values are so aligned, and philosophically we are aligned.”
The two trade compliments in their new relationship. “We’re not here to be redundant to each other. It’s a team sport: You need more than one to play,” Sullivan said. “He has a very fresh perspective. He has no baggage in this industry, and he is not bringing any preconceived notions with him.”
Sullivan was named president of Claiborne last January when Charron revealed his plans to retire at the end of 2006 and was the sole internal candidate considered for the ceo job. She joined Claiborne in 2001 as group president of Liz Claiborne Casual, Collection and Liz Claiborne Woman, and the next year was named an executive vice president with additional responsibility for accessories, cosmetics, retail, outlet and licensing. Since 2005, Sullivan has overseen all of the company’s brands.
Sullivan has a restricted stock grant that provides her with 32,300 shares — worth almost $1.5 million at current value — half of which vest in the first quarter of 2007 and the other half on Jan. 2, 2008, according to Claiborne’s 2006 proxy and 10-K.
“I have enjoyed his approach in his initial weeks, and I am very optimistic,” Sullivan said. “He’s very respectful. It’s been very grown up how this has gone down. I actually think I have one of the best jobs in the industry. I am just a year into this job as president, and you can’t get everything accomplished in a year.”
McComb seems committed to creating an environment that encourages Sullivan to remain part of his team. “You can say this is an arranged marriage and will it work out?” he added. “I’ve grown up figuring out how to keep the good ones like Trudy Sullivan.”
Former J&J chairman Vernon called McComb a “pied piper,” and Brian Perkins, president of McNeil, said his former colleague has a talent for cultivating and preserving talent when he joins a new team.
Perkins has known McComb for almost 15 years. They were first colleagues at J&J, and then he recruited McComb into his group.
McComb’s creativity sets him apart, said Perkins. He recalled the launch of Pepcid, for which McComb helped conceive the commercial featuring a family speaking boisterously in Italian at the dinner table to convey the brand’s position of enjoying food, fun and family without heartburn. “Imagine advertising an OTC drug in Italian with English subtitles — clearly creative,” Perkins said.
Perkins also pointed to McComb’s solution to the requirement of including drug warnings in Tylenol commercials: feature the company’s vice president of sales telling viewers that if they did not read the warning labels and use the proper dosage of the drug, he would rather them not use Tylenol at all.
“He’s probably not what you would expect coming out of health care,” Perkins said. “I don’t think there is an industry Bill couldn’t tackle. It’s pretty easy to see him skipping into an industry like apparel, where his creativity and design could excel.”