CLAIBORNE’S LOW END PICKS UP
Byline: Anne D’Innocenzio
NEW YORK — In the world of mass and moderate labels, Liz Claiborne Inc. has aspired to be the creme de la creme, and finally the approach is working.
Last year, Claiborne’s Special Markets division, which produces five mass and moderate labels, became profitable after several turbulent, money-losing years since its entrance into the zone back in 1992.
“In every single business, we exceeded our plan last year,” said Kim Roy, group president of Special Markets and accessories.
Since taking charge of the Special Markets division in 1995, Roy has helped spearhead the unit into becoming a key component of Claiborne’s overall portfolio. Her goal: to have each label be in the top 20 percent of the price structure of their respective markets.
The division’s roster consists of Crazy Horse, which is sold exclusively to J.C. Penney stores; Russ, a mass-market label sold to Wal-Mart and Kmart; First Issue, an exclusive brand to Sears; Villager, which is in moderate-priced chains such as Kohl’s and Mervyn’s, and Emma James, an upper-moderate label for department stores.
“That approach has really helped us be the leader in the business,” said Roy. “It has helped us get good, visible real estate and choice doors.”
Not to mention that it has helped the company improve its profit margins.
Last year, sales at the Special Markets unit increased by $100 million, reaching $236 million in wholesale volume. The company has told analysts that it projects a 50 percent sales increase this year and eventually envisions a $500 million business, fueled by brand growth and acquisitions.
Currently, the division accounts for about 8 percent of Claiborne’s overall volume, which hit $2.8 billion last year, according to analysts.
Roy declined to say how much profit the division made last year, but the overall category at Claiborne has seen diminishing losses since the company moved into the moderate field with the purchase of Russ, Villager and Crazy Horse in bankruptcy in 1992. In 1998, Special Markets broke even, according to Wall Street analysts. Now, with Special Markets turning a profit, its approach to its mass and moderate businesses is winning kudos from Wall Street.
“They are finally getting their act together,” said Josie Esquivel, an analyst at Morgan Stanley Dean Witter, who admitted that she had initially questioned the company’s diverse strategy of going after different channels with a variety of labels.
Esquivel added that growth has been uneven, with Crazy Horse and Villager doing the best. She added that First Issue has had its share of “ups and downs,” due in part to management changes at Sears. Kmart’s management problems also affected Russ, she said.
“This could be a billion-dollar business if they want,” said Lawrence Leeds, executive vice president and managing director at Buckingham Research. “But they are holding back. They have consistently rejected orders from Wal-Mart to make sure their margins are strong.”
Roy declined to offer sales figures for each of the five labels, but she confirmed that the two top sales generators within the division are Villager and Crazy Horse, which are “neck to neck,” she said.
The Special Markets division and Claiborne’s better core labels — LizSport, Collection and LizWear — cater to different consumer segments, but the two businesses share synergies in sourcing and distribution.
In particular, Russ’s relationship with Wal-Mart, which requires highly efficient distribution services from its vendors, has helped increase efficiencies in the better businesses, she said.
The Special Market’s “cross-dock operations,” which transports garments from countries of origin directly to the retailer, will be unveiled for fall for the mass and moderate division, and Roy said it could be applied to Liz Claiborne’s better business.
There are also synergies in sourcing. For example, if Claiborne’s better business is a front-runner in an uncharted sourcing territory, the moderate business will follow, and vice versa, Roy said.
As for sales growth, the firm’s formula is the same for each of the five brands, Roy noted, which is to expand its core business, as well as moving into business casual and special sizes.
The company is also layering on nonapparel categories. Last month, Villager expanded into home accessories, and for spring selling, Crazy Horse, Villager and First Issue all launched shoe lines. All three brands also have handbag collections.
Despite Penney’s woes, Crazy Horse has had stellar success, according to analysts. For 2000, the misses’ sportswear collection will be in more than 700 doors, petites will be in more than 300 and large sizes will be in more than 200. The Crazy Horse men’s collection is in about 450 doors, according to Roy.
Villager’s sales have been boosted by the growth spurts at Kohl’s and Mervyn’s, two of its key accounts. This year, Villager’s misses’ collection will be in more than 900 doors, petites will be in about 400 and large sizes will be in about 600.
This year, Russ’s misses’ collection will be in about 1,600 doors; petites will be in about 800. Its versatile offerings, including dressier looks, will be in 400 of the 1,600 units that carries misses’. The line, which had been limited to casual knit dressing and velour, is now adding such fabrics as fine gauge knits for spring deliveries, Roy said.
As for its First Issue collection, the company added a weekend sportswear component called First Issue Sport this spring. Sears’ misses’ collection will be in more than 400 doors, casual more than 200, petites about 200 and plus sizes more than 200.
One of the more problematic lines has been Emma James. When it was first launched, it was supposed to be part of a group of labels that stores were calling “upper moderate,” which included a much-hyped Halston line. Initially, the upper-moderate strategy did not catch fire. A year later, Halston’s moderate division was shuttered, and Emma James went for a makeover, undergoing a business-casual attitude.
The line made its debut in 225 doors, and a year later, stores had reduced that number to 100. The business has dramatically improved, and is expanding into large sizes and a casual component. This year, the misses’ collection will now be in more than 700 locations, with casual and plus sizes each in about 300 locations.
Roy noted that Emma James has been able to differentiate itself from the other labels because of its exclusive distribution in department channels.
“Every new line has start-up problems,” said Kathy Bufano, executive vice president of merchandising at Macy’s East, acknowledging some initial snags with Emma James. But she added, “Emma James has been excellent. We see a lot of potential.”
She added that for fall, Emma James’s large-size collection will be in 25 Macy’s units, and its misses’ line will be in 40 stores. Bufano said she envisions carrying Emma James Sport in all the doors that carry the career line. She added that Emma James’s seasonless fabrics, blouses and two-piece dresses have done well for spring.