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NEW YORK — Will Liz Claiborne Inc. go outside or in to replace its chairman and chief executive officer, Paul Charron?

A Claiborne spokeswoman had no comment on whether Claiborne had hired an executive search firm to find a successor to Charron, 62, whose contract expires on Dec. 31, 2006. But headhunting sources have indicated that A.T. Kearney Inc. or Spencer Stuart may have been given the search to find the next head of the $4.6 billion diversified apparel company.

“I can’t comment on anything,” said Susan Hart, consultant and co-leader of the North American retail and apparel specialty practice at Spencer Stuart. A.T. Kearney officials couldn’t be reached Friday for comment.

Susan Hart, consultant and co-leader of the North American retail and apparel specialty practice at Spencer Stuart. A.T. Kearney officials couldn’t be reached Friday for comment.

Several industry observers believe there are a select few executives in the fashion industry who could be considered. Prior to Claiborne, Charron’s background was in consumer products and he’s injected that culture into the apparel group, launching an acquisitions drive, doing extensive consumer research and making it more responsive than many other fashion companies.

Given that, observers said it is most likely Claiborne would look outside the industry to recruit its next ceo in the same way that Gap Inc. did with Paul Pressler, formerly of Disney, and Gucci Group did with Robert Polet, who worked at Unilever.

As for industry candidates, those mentioned as possibilities include Roger Farah, chief operating officer of Polo Ralph Lauren; Steve Sadove, vice chairman of Saks Inc.; Rose Marie Bravo, chief executive officer of Burberry; Hal Kahn, former chairman and ceo of Macy’s East; Mindy Grossman, vice president of global apparel at Nike; Janet Grove, chairman and ceo of Federated Merchandising Group and vice chairman of Federated Department Stores, and Joseph Gromek, president and ceo of the Warnaco Group.

Of this group, observers described Farah, with his major department store, athletic chain store, and women’s and men’s wholesaling experience, as a proven leader, and Sadove, former vice chairman of Bristol Meyers-Squibb, who led Clairol to become the number-one hair care business in the U.S., coupled with his Saks and General Foods Corp. background, as a strong executive and brand builder. Bravo’s success at Saks Fifth Avenue and Burberry could make her a prime candidate and sources said she may want to come back to New York; Kahn is a strong merchant; Grossman has wide-ranging wholesaling experience at Polo Jeans, Warnaco and now Nike; Grove excels in product development and merchandising, and Gromek is racking up a good track record at Warnaco.

This story first appeared in the June 27, 2005 issue of WWD. Subscribe Today.

As far as outside candidates, Claiborne could pull from companies ranging from Apple to Starbucks. Among possibilities mentioned by several observers were Carly Fiorina, former ceo of Hewlett-Packard; Ann Fudge, former chairwoman and ceo of Young & Rubicam, who earlier was president of the Maxwell House Coffee Co. unit of Phillip Morris Co., or Indra Nooyi, president and chief financial officer of PepsiCo, who reportedly was considered among the contenders to succeed Domenico De Sole at Gucci Group, a job that went to Polet.

Some industry executives pointed to the fact that Claiborne’s two key executive vice presidents, Trudy Sullivan and Angela Ahrendts, would likely be inside candidates to succeed Charron. However, several industry observers said they didn’t believe they were qualified to be ceo of the entire Claiborne organization.

One twist in the search for a successor could come from a merger between two close competitors. Following the spate of retail mergers in the past year, it is widely believed the next wave of consolidation will be vendor-driven. Some observers have mooted a merger between Claiborne and Jones Apparel Group, although others believe the companies’ cultures are entirely different and a merger would lead to more homogenous products and a decline in quality. Still, if a merger occurred between the two giants, sources said Charron would want to run the merged entity for a year or two before passing the baton to Peter Boneparth, chairman and ceo of Jones.

More likely than a merger, though, sources said, is that each company will continue to expand either through verticalization or by buying a large retail chain.

Still, whether it goes outside the industry or taps a veteran, most observers believe the Claiborne board faces a hard task in filling Charron’s shoes. The ceo has the rare combination of consumer package goods and apparel industry experience after tenures at Procter & Gamble, General Foods Corp. and VF Corp. and is widely credited with being one of the most strategic thinkers in the industry. Since taking over in 1994, Charron has spearheaded the transformation of Claiborne into a multibrand, multicategory and multichannel business consisting of 38 brands. Claiborne has experienced 36 consecutive quarters of sales growth, with net income up 12.1 percent and sales ahead 9.2 percent for the last fiscal year.

Charron’s successor would have to step into a role that’s large in scope and encompasses retailing and domestic and international wholesaling of sportswear, jeanswear, jewelry, beauty, accessories and home products.

One hurdle in finding a replacement for Charron is that the fashion industry has had mixed results taking executives from outside the apparel/retail world, where relationships and industry know-how are critical. In addition to Pressler and Polet, Phil Marineau, president and ceo of Levi, Strauss & Co., came from Pepsi-Cola, and William Perez, Nike’s new ceo, had previously been ceo of the $6.4 billion S.C. Johnson & Co., which makes products such as Windex, Ziploc and Johnson’s Wax. Both Marineau and Pressler have had ups and downs at their respective companies. Levi’s posted eight consecutive years of sales declines — although it recorded two quarters of sales growth last year. And Pressler rode a positive wave at the start of his tenure, but has stumbled in recent quarters. It’s too early to determine Polet’s performance at Gucci, although his projections are ambitious, or Perez’s at Nike.

There are several fashion executives who have successfully crossed over, however, including Antonio Belloni, group managing director at LVMH Moet Hennessy Louis Vuitton, who came to the French luxury giant after a 22-year career at Procter & Gamble; Valentino’s Michele Norsa, who came from publishing, and Louis Vuitton chief Yves Carcelle, who had previously worked at French bedding maker Descamps.

The question is whether the board can find an executive within the industry with the skills needed to run the new Claiborne. A Harvard MBA, Charron began his career at Procter & Gamble and held marketing management positions at General Foods Corp. and Cannon Mills Co. He later switched to the apparel industry, becoming executive vice president of VF Corp. before joining Claiborne in 1994 as vice chairman and chief operating officer. The following year, he became president and ceo, and in 1996, was elected chairman.

Charron’s consumer products strategy has created an empire of diversified brands and distribution channels that has helped mitigate risks. During his tenure, Charron engineered a laundry list of acquisitions including Juicy Couture; Segrets, maker of Sigrid Olsen; Ellen Tracy; Lucky Brand Jeans; C & C California; Enyce; Laundry by Shelli Segal, and Mexx, taking a predominantly wholesale business and turning it into both a wholesaler and retailer.

In addition, Charron expanded the company internationally with the Mexx business and has developed lower-priced lines for mass merchandisers. The company’s distribution now encompasses upscale and mainstream department stores, owned and operated specialty stores, independent specialty stores, e-commerce, mass merchandisers and factory outlets. The company also has the licensed DKNY Jeans, DKNY Active and City DKNY businesses, in addition to its own Liz Claiborne, Dana Buchman, Realities, Claiborne, Crazy Horse, First Issue and Villager labels, among others.

Over the last few years, Claiborne has become much less dependent on department stores. In a recent interview, Charron said, “The bottom line is that we have shifted away from American department stores, frankly, as their share of the total market has declined. They’re still a large and profitable portion of our business. Barring some sector turnaround, they will probably become less important to us.”

So is there anybody within the industry who could fill Charron’s shoes?

“Roger Farah,” said Allen Ellinger, senior managing director of Marketing Management Group, a consulting firm here. “He might want to run a company where he doesn’t have anyone looking over his shoulder. He has men’s, women’s and retail experience. He’s a complete package. He has a proven track record and a strong retail background and a strong background in men’s and women’s.”

Harry Bernard, executive vice president and chief marketing officer of Colton Bernard, a San Francisco consultancy, said, “The only person I’d think of is Roger [Farah], who has the stamina, the smarts and the personality that’s required, although he’s not doing too badly where he is.” He said most likely the board will go “outside the industry; they’ll get someone from hard goods or consumer goods.”

Unfortunately, Bernard said the apparel industry hasn’t properly groomed the next generation to take over a position such as Charron’s. “Whoever it is, he or she will have to be a global player, but will need a very strong U.S. presence,” he said.

“Paul Charron has clearly transformed Liz Claiborne from a single-category, single-brand apparel manufacturer to a world-class consumer marketing and distribution conglomerate, with a portfolio of some 38 brands,” said Robin Lewis, ceo of Robin Lewis Inc., a consulting firm. “As a part of that enormous shift he also changed the entire culture, including an executive team that has the intelligence to understand this positioning advantage and the capability to execute his strategic vision.”

Lewis said that as Charron moves toward retirement, the task to find his successor will be in the board’s hands.

“To find his ‘clone,’ however, I have to believe they will be looking for someone highly experienced in global consumer marketing [from any industry], who understands that the traditional retail and wholesale relationship is obsolete, and instead views the relationship between their brands and the ultimate consumer as seamless and direct. I believe this is Paul Charron’s view, which therefore permits his business model to include distribution of his brands directly to the consumer [now at 38 percent of Liz’s total business, and climbing].

“This is not to say that Liz Claiborne will cease to distribute through traditional retail channels, just that they will do so only if it fits their own multidimensional distribution strategy,” said Lewis.

In addition, he said the other “boilerplate criteria” will be on the list, as well as whether the candidate has ceo experience. “Some ceo’s I’ve talked to from large corporations do not believe it’s possible for someone to ‘grow’ into the job when the company is the size of a Liz Claiborne,” said Lewis.

Terre Simpson, president of Simpson Associates, a New York-based executive search firm, believes that Charron’s successor will probably come from outside the industry.

“I think they’ll possibly have to go outside on the basis of the narrowing leads in the industry in terms of the caliber and needs necessary to run that business. There’s no one of that context to pull from the business,” she said, citing just a handful of competitors such as Jones’ Peter Boneparth. “I think they’ll go to a consumer packaged firm or possibly the entertainment business.”

When pressed for executives who could be qualified within the business, she cited Farah, Gromek and Vanessa Castagna, former chairman and ceo of J.C. Penney stores, catalogue and Internet, who’s now a senior member of the operations team at Cerberus Capital Management and executive chair of Mervyn’s. “I also hear wonderful things about [Claiborne’s] Trudy Sullivan,” she added.

Anne Maxfield, co-founder of Project Solvers, a staffing firm targeting the fashion, design and cosmetics industries, observed, “I think the company’s board will probably go outside the industry. Liz is a company whose corporate attitude encompasses a global corporate view. The experience needed to run these global firms often comes from outside the industry because one of the problems is that retailers no longer have the training programs that gave us [our] great merchants. And anyone who has gone through one of those programs is at the age where they may not want to run a huge conglomerate.”

Bobbie Lenga, managing director and leader of the retail practice at Russell Reynolds Associates, believes that Charron has done a good job grooming internal candidates.

“Paul is always talking about how great his team is, but obviously he will need to look outside as well,” said Lenga. She said she knows both Ahrendts and Sullivan, and believes they’re both ready for the next step. “They’re both really good, but are different stylistically. Both are talented.”

Elaine Hughes, president of E.A. Hughes, an executive search firm here, thinks it will be difficult to find a successor from within the apparel industry.

“I don’t think that there’s any single person who’s going to be able to do that from the industry. They’ll have to get very creative and go outside the industry. I don’t know their criteria…” But she complimented Claiborne’s current management team, and believes they are highly capable to run the company.

Andrew Jassin, managing director of the Jassin O’Rourke Group, a consultancy here, said that Charron brought a tremendous skill set to the apparel industry, including expertise in marketing and brand positioning. He believes that companies today need to be run as brand marketing firms. “The only way is to understand all aspects of the business,” he said. Jassin said it’s possible that his successor could be a retailer. He thinks executives such as Hal Kahn or Steve Sadove could do it.

Some people believe that Charron will extend his contract for another two years, and might even have to extend his contract until 2008 if they have a search.

“My guess is he [Charron] will stay a little longer,” said Laurence C. Leeds Jr., chairman of Buckingham Capital Management. That said, he added, “Paul’s philosophy is you don’t have to be an apparel person to run an apparel company.”

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