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With no end to department store consolidation in sight and the venue losing market share to mass merchants and luxury retailers, Liz Claiborne is ramping up its direct-to-consumer business, which encompasses outlet and full-price stores and the Internet, with a goal of 1,400 stores worldwide.

Claiborne opened its first stores for First Issue in 1988, but it wasn’t until the mid-Nineties that its transformation from an apparel manufacturer to a vertical retailer began to take shape.

The company’s retail adventures haven’t always been smooth, however. Its Liz Claiborne flagship on Fifth Avenue and 52nd Street never found an audience after it opened in 1995. The company converted the space to its Mexx concept in 2003.

This year, the entire retail network, including international and domestic company-owned stores, will account for 28 to 29 percent of the company’s total volume, or roughly $1.4 billion. That’s up from 25 percent in 2005, said Trudy Sullivan, president.

“Wholesale is still the biggest piece,” she said, however, “the biggest growth is coming from retail. It could be 40 percent in the next three to five years. If we’d have done the J. Jill deal, it would have been up to 36 percent for 2006.”

Claiborne last month was outbid by Talbots in its effort to acquire J. Jill, a company with retail, catalogue and Internet businesses.

Direct-to-consumer is exactly where Claiborne wants to concentrate its efforts. The challenges department stores are facing is “what’s driving us into the specialty store arena,” Sullivan said. “We have brands that can function well in multiple channels because that’s how we feel consumers behave. Consumers want 24/7 access to products.”

Sullivan sounded unenthusiastic about the prospect of Claiborne developing a brand for the mass market. “Our shareholders don’t like 2 percent profit margins,” she said. “We did apparel for Target a number of years ago. They kind of went to school on us and did it themselves. It would be good to find a way to do it.”

Claiborne has a presence at Kohl’s and Sears, where its brands are priced at the high end of the spectrum.

This story first appeared in the March 27, 2006 issue of WWD. Subscribe Today.

“We like having a portfolio of brands in a retail space,” Sullivan said. “The portfolio approach is emerging on the retail specialty store side. I notice that Chico’s has four formats and Abercrombie & Fitch has several formats. It was our strategy from Day One.”

The company has designated several “power brands,” which will be the beneficiaries of aggressive expansion. They include Lucky, Juicy Couture, Mexx and Sigrid Olsen. This year the company will open 125 stores for the brands combined. Outgoing chairman and chief executive Paul Charron has said Claiborne will eventually open 200 stores for each of seven brands, bringing the total number of stores to 1,400.

During a conference call this month, Charron said the retail strategy centers on how each of the specialty retail brands — Juicy Couture, Lucky Brands, Sigrid Olsen and Mexx — are positioned in the marketplace. He said each brand has “a unique aesthetic with an especially clear and relevant target consumer.”

“We want to get to critical mass quickly,” Sullivan said. “Our forward guidance has retail and international growing by double-digits. We’re invested heavily in infrastructure to support direct-to-consumer. We have highly leveraged our back-end, store support functions, brand team, planning, merchandising and store operations. We’ve supported it all with a really significant investment in technology.”

E-commerce is an underdeveloped area, Sullivan conceded, but there are plans to develop the Internet businesses of several brands. Lucky, Liz Claiborne, Sigrid Olsen, Juicy Couture, Elizabeth, C&C California and Prana now have e-commerce sites.

“Lucky is doing extremely well and so is Liz Claiborne,” Sullivan said. “We’re using third-party fulfillment. When we looked at acquiring J. Jill, one of our ideas was doing our own fulfillment. We could do a significant business in e-commerce. That whole space is growing by leaps and bounds.”

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