PAUL CHARRON: FROM THE OUTSIDE IN
EIGHT YEARS AFTER JOINING LIZ CLAIBORNE INC., THE HARVARD BUSINESS SCHOOL GRADUATE HAS GUIDED THE APPAREL GIANT ON AN UPWARD COURSE — RESTORING THE LUSTER TO ITS CORE BRAND, EXPANDING IT T0 COVER 26 LABELS AND TRIPLING ITS SHARE PRICE IN THE PROCESS.
Byline: Kristin Larson
For Paul Charron, it’s no surprise that he ended up being chairman and chief executive officer of one of America’s most prominent companies – after all, his favorite advertising slogan is the U.S. Army’s “Be All That You Can Be.”
What is unusual, though, is that the native of Louisville, Ken., whose first job was managing the Dawn dishwashing liquid brand and who’s not a retailer by trade or apparel manufacturer by training, ended up leading Liz Claiborne Inc., one of the country’s largest and most recognizable apparel and accessories firms.
Some executives might have been intimidated that they would be swallowed up by the great garmentos, but that’s not in Charron’s makeup.
“This is what I’ve always wanted to be — a ceo of a major corporation — and it was just a question of developing a skill base and having somebody recognize that and having the opportunity,” said the 59-year-old Charron during an interview at the company’s Seventh Avenue offices. “There were critics who said coming in that I wasn’t a ‘fashion guy’ and that Liz Claiborne was headed south and couldn’t head north again. And I guess the record speaks for itself.”
The $3.4 billion apparel giant now boasts 26 brands under its international and domestic umbrella — most of which have been acquired or created under Charron’s eight-year reign. But the charismatic and amiable Harvard Business School graduate still doesn’t seem like the typical fashion type — a second or third-generation executive weaned in the cutting room. It is a criticism that doesn’t ruffle him in the least.
“This isn’t rocket science,” he said flatly, using a phrase he likes to repeat when talking about managing a fashion, apparel and accessories company like Claiborne. “This is Business Inc. and I’m a product of my own environment. These principles relate to business and they relate to the fashion business as much as they relate to the consumer products business as much as they relate to the technology business. Show me a business that doesn’t have as its number one priority product as it relates to excellence. Show me a business that doesn’t want to understand its consumer and that doesn’t appreciate value and on and on and on. I’ll show you businesses that aren’t successful.”
Charron’s consumer products approach toward managing a fashion company, cultivated during his early career at Dawn’s parent, Proctor & Gamble, is perhaps the reason for Claiborne’s recent success. But isn’t fashion supposed to be all about art?
“It’s not all art. A lot of it is science and it doesn’t deprecate the art side of the equation,” said Charron, who is clad in his favorite label — a navy suit by Claiborne, his “I Love New York” cuff links punctuating the look. “Art without science is not commercial. What we’ve done in this company is we’ve acknowledged that we’re competing not against one another but we’re competing against people on the outside.”
Liz Claiborne is a markedly different company today than it was on May 9, 1994, when the imposing Charron entered the showroom first walked by Liz Claiborne, Art Ortenberg, Jerry Chazen and Leonard Boxer in 1976. The quartet quickly built their company into one of Seventh Avenue’s biggest-ever success stories, yet by the time Charron arrived 18 years later it was struggling for oxygen and had been dubbed by many as “a mature company and brand” — a label often the death nell in the fast-paced fashion world.
Today, the company’s core division, Liz Claiborne Casual, is 50 percent larger and one that credits diversification as its primary vehicle of growth. Its brands now range from its namesake signature label to Sigrid Olsen, Laundry by Shelli Segal, Lucky Brand Dungarees, several DKNY divisions, Kenneth Cole and the European apparel and accessories company Mexx Group BV, based in the Netherlands.
It has also developed its Special Markets division started under Chazen, which now sells to such discount and moderate retailers as Wal-Mart Stores, J.C. Penney Co., Kohl’s and Mervyn’s. The division generates roughly $400 million or 11 percent of Claiborne’s annual sales.
As a result, the company’s products now range from mass market, moderate and better-price sportswear to contemporary dresses, jeans and status labels, including some freestanding stores. At the close of 2001, the firm operated 423 stores of its own — 206 specialty stores under six different nameplates, including 71 Mexx stores in Europe, and 217 outlets.
Even at this economically difficult time, Charron said the company could announce any day another brand introduction that would expand its reach even further.
“As we speak, our product is selling pretty much across the board,” he said. “We’re diverse: Our portfolio of 26 brands is sold in 26,000 venues around the world. So, when a consumer has an interest in fashion, apparel and accessories, my sense is there ought to be a product at Liz Claiborne Inc. to meet his or her needs. There’s not a limit to what we can do.
“Can this company be a $10 billion company? Sure, if the management is imaginative enough, disciplined and thoughtful.”
Charron said the next five years would be a period of major consolidation in the vendor and retail community, across al channels.
“You’re also going to see consilidation and ventures that are nontraditional, that we can’t even concieve of today,” he predicted.
Charron credits the success of the company — in the first quarter ended March 30, Claiborne posted a 12 percent increase in income to $50.9 million over year-ago results of $45.5 million on a sales gain of 8 percent to $892.9 million from $826.7 million; sales in 2001 were up 11.1 percent to $3.45 billion from $3.1 billion — to its employees, of which about 40 percent in key positions were at Liz Claiborne when he arrived in 1994.
“The success of the company reflects more on the quality of the people and the holistic nature of the approach we have taken than it does on the success of any one individual — including me,” he said. “We’re a stronger company today. We’re more robust. We’re on more of a substantive platform. Our growth prospects are enhanced. The people here are better.
“Maybe some of those early criticisms of me could have conceivably been justified. That’s right, I didn’t come out of this industry. I didn’t have the same experience that people traditionally have. By the same token, some of those people who were critical maybe had not recognized the world had changed. To manage a $2 billion, let alone $3.5 billion, multidivisional, multifunctional branded portfolio is very different in 2002 than it was in 1994.”
When Paul Charron arrived at Liz Claiborne, the first step in turning around the ship was understanding what he was commanding, Charron said.
“I believe if you hear the same thing from three different places it’s probably true. So I used that process to craft some observations.”
Charron presented these ideas in a six-page paper to Chazen, who was still chairman, organized under the topics: marketing, merchandising and management. The paper became the road map for Liz Claiborne’s future and it still adheres to it today. He then defined the company’s core competencies: design, sourcing, fashion, apparel and accessories.
Charron said in the midst of all of this redefining he went straight to the guts of the company — Liz Claiborne Casual — and focused his energies on reviving that first.
“People told me it couldn’t grow, that it was mature. People told me all sorts of stuff,” he said. “Well, it’s 50 percent larger today than it was seven years ago and we’re in no more outlets. It’s still an American department store brand. So much for the product lifecycle theory — I don’t believe in the product lifecycle theory. I believe you constantly nurture and renurture, you develop and redevelop these brands. You love them like they’re a child. Just because the child turns into an adult do you say ‘my job is over?’ No, I don’t believe that.”
He admits the first six months were rocky, but within eight months, the company started to see some small victories.
“Once we began to hit our numbers in sales and earnings we stopped the decline. We got morale moving in the right direction and people began to get a little attitude and positive momentum has a way of feeding positive momentum. We started to convince people they could win.”
After establishing the company’s five core competencies, Charron invented a collection of seven relating principles: product, consumer understanding, value, focus, cost, technology and creativity.
“These are pretty basic and straightforward and oh, by the way, what do any of them have to do with fashion?” he asked rhetorically.
When Charron joined the company, the stock, adjusted for splits and dividends, closed at $10.85 in trading on the New York Stock Exchange and lost 40 percent of its value in his first 10 months at the helm. Since then, the trend has been consistently positive. On Thursday, when first-quarter earnings results were posted, the stock closed at $31.31 on an adjusted basis. The company has consistently paid a quarterly dividend of 11 cents during Charron’s tenure, and the stock split two-for-one on Jan. 2.
Another key strategy Charron employed was advertising — until 1996, the company never spent a dollar on marketing the brand – and consumer research. Claiborne now spends $1 million a year on “getting inside the lady’s head” through market research and focus groups.
“It’s funny. This company has the disadvantage of not having a ‘name designer’ on premise who tells what the color red is going to be and whether skirts are going to go up or down,” he said. “That’s a tremendous disadvantage, but one of our greatest advantages is that we don’t have a ‘name designer’ on premise to tell us this is the color red and whether skirts are going up or down.”
And if Charron hasn’t become a garmento, he’s slowly become taken with the industry. “There’s an element of art to it and an element of science to it,” he said. “But when I read things that people write about me, it usually relates to the science part of who I am.”
Speaking of who he is, Charron’s hobbies include cooking Italian food for his wife, Kathy, a former clinical speech pathologist turned interior designer, as well as reading, playing tennis, traveling, particularly in France and Italy — and anything to do with his children. His daughter Ashley is a sophomore at Cornell University, and son Brad, a recent Notre Dame graduate, is now living in Amsterdam and working in business.
“I personally think I’m much more of an artist than I am a scientist because I have a creative side, but it’s creativity within a context,” Charron said. “And yet, I’m mathematically inclined — actually when I was in high school, I wanted to be a mathematician. I didn’t always have an interest in fashion and when I went into college [at Notre Dame] I was going to be a lawyer and I spent five years in the Navy thinking I was going into politics. I had a scholarship for a law school in Kentucky and as an afterthought I applied to one business school — Harvard — and I got in.”
While his business education was honed at Harvard, Charron said the two experiences that were the most important were the years spent in the U.S. Navy during Vietnam, where he drove ships and operated communication electronics, and P&G, where he worked for eight years for brands such as Dawn and Joy. He also worked at VF Corp, where he got his first taste in fashion and credits that time for preparing him for his role at Liz Claiborne.
“To be 21 years old and have 47 men working for you in a combat zone, to train and collaborate and prove your mettle under fire — to have that kind of opportunity at a relatively tender age of 21, 22, 23, 24, had had a significant impact,” he said. “Then I was privileged to join up with Procter & Gamble, where I learned, I acquired, what they had to offer and from a professional point of view that has been the most substantial. It gave me a strategic platform and it affirmed for me the benefits of rigorous analysis.”
It could be said that Charron has applied the same type of analysis to study the latest trends in skirt lengths or the hottest shade of red as he did to dishwashing liquid. He doesn’t disagree.
“A lot of the principles I bring to the office every day I got at P&G and I’ve been refining them for many years,” he said. “I’ve got 26 brands here; 25 years ago I had five or six. Tomorrow I could have 40. What difference does it make? You run them the same way, like you love each of your kids. And when you are with that child, you are focused on the needs of your kid.”
He has grown quite proud of his most grown, Liz Claiborne.
“This has been the evolution of one of America’s great companies and it’s not over yet,” he said. “Early on, I said to my management team that they had the opportunity to be a participant in an event that would only happen once or twice in a career — maybe for a lot of people never – and that is the rejuvenation of one of America’s great brands. And we did it. In this business, you’ve got to be more successful tomorrow than yesterday, but we have restored the luster to this brand. We’ve contemporized it and it’s a bona fide, consumer products company in the fashion apparel and accessories business.”
Charron said his goals for the company can be summed up in three words: Faster, smarter, better.
“Our goal is to be the preeminent marketing and manufacturer of fashion, apparel and accessories and we’re not done yet,” Charron said. “Yet it seems like I came here yesterday. I remember walking into a meeting for Liz Claiborne Casual and they were all scared to death. I guess I didn’t help them when I said ‘I am an agent of change’ and I’ve been an agent of change ever since I came here.”