LIZ CLAIBORNE SEES IMPRESSIVE RETURNS ON LICENSES
Byline: Anne D’Innocenzio
NORTH BERGEN, N.J. — Liz Claiborne’s acquisition frenzy is expected to reap some hefty rewards in coming years.
Paul R. Charron, chairman and chief executive officer of Liz Claiborne, said Thursday that Claiborne’s newly acquired or licensed brands — Sigrid Olsen, Lucky Brand Dungarees, Kenneth Cole, DKNY juniors, jeans and career, and Laundry by Shelli Segal — should total $1 billion in sales within the next five years.
That was just part of the rosy picture Charron presented to stockholders at the annual shareholders’ meeting of the $2.8 billion apparel giant riding on the coattails of a stellar year and first quarter.
“We have a richer, more diverse portfolio,” said Charron, adding that such diversity offers a “measure of protection” against any particular downswings in a fashion category.
The company’s licensed three-pronged Kenneth Cole business should generate $250 million in the next five years, as reported. The Kenneth Cole New York women’s contemporary line will be in stores for fall, followed by Reaction, a denim-driven sportswear line, to make its debut for fall 2001, and Unlisted, a junior line, to be in stores for spring 2001.
Meanwhile, DKNY juniors was launched in 270 doors this spring, and the DKNY career line, which company officials announced at the meeting will be called DKNY City, could reach $200 million within the next five years. The line will be in stores for spring 2001.
As reported, the company’s first-quarter earnings rose 5.1 percent to $46.5 million from $44.7 million, easily beating Wall Street estimates. Sales for the period ended April 1 were up 15.5 percent, jumping to $809.5 million from $700.8 million.
In 1999, sales rose 10.7 percent to $2.8 billion from $2.5 billion. Profits gained 3.2 percent to $192.4 million, or $3.12 a share, from $186.5 million, or $2.83, before charges in the previous year.
At the annual meeting, which was held at the company’s North Bergen, N.J., corporate headquarters, Charron mapped out six key growth areas. They are:
“Defend and grow the department store channels,” through such licensed and acquired brands as DKNY, Lucky, Laundry and Kenneth Cole.
“It’s a $30 billion pie and we intend to get a bigger piece,” he said.
Expand the Specialty Markets division, which comprises moderate and mass labels. Last year, the division generated sales of $240 million.
As reported, Claiborne will be launching a Niki Taylor collection for Target, marking the company’s first selling venture to this 980-store powerhouse chain.
“Niki has great sales appeal,” said Charron.
Nurture and develop new brands. Charron noted that the company continues to look at acquisitions, including specialty store retailers. He would not elaborate.
Build the company’s international business, with a focus on Europe, through either an acquisition or a joint venture. Currently, the company’s international sales account for 5 percent of overall volume. Charron expects to implement a strategy to attack the European market within the next 12 to 18 months.
Expand the company’s specialty store business, including the addition this year of 20 new stores under Lucky Brand Dungarees. The Vernon, Calif.-based company currently operates 13 stores.
Develop Claiborne’s e-commerce business. The company sells Lucky through Luckybrands.com, and sells its own Liz Claiborne brands through Macys.com and Nordstrom.com. Elisabeth is sold through Modestyle.com and Claiborne’s men’s wear is sold through smartcasual.com.
Charron pointed out that the company is considering selling Liz Claiborne fashions on its own Web site Lizclaiborne.com, but said he doesn’t want to offend the firm’s retail partners.
Charron pointed out that key growth categories include men’s, casual sportswear, jewelry, cosmetics and Special Markets.
In particular, moving into Target with the Niki Taylor line represents another big growth opportunity. Analysts project it could be a $100 million to $200 million business within the next three years, though Charron declined to comment.
He conceded that learning the Target business won’t be easy, adding that the company has to learn the logistics of distribution and how to position its mix of product against Target’s, which is different from department store offerings.
“They are very sophisticated,” Charron said. “They are turn-oriented.”
There are still other challenges ahead. Liz Claiborne Collection, its career line, is still having problems, and its Dana Buchman line has been soft, though the line has seen improvement at retail this spring.
Claiborne’s dress division has had a “substandard” performance, and that’s why Claiborne is now licensing the business to dress experts Leslie Fay Co., Charron said.
Claiborne’s major challenge is managing its wide-ranging portfolio of brands, from Lucky Brands’ trendy denim looks, to the more conservative bridge line Dana Buchman.
“The success lies on how we interpret the trends for our family of brands,” said Denise Seegal, president. “Balance is key. Our job is to quantify the trends and to make sense of them.”
For example, the capri pant, spring’s hot ticket, is being marketed through Claiborne’s different channels and consumers, from Sears to Macy’s.
Seegal added, “The baby boomer is not trendy. She is more traditional. That is Liz Claiborne’s core customer. If we have apparel that is too trendy, she will walk away.”
On the other hand, the exact opposite is true for the trend-driven brands like DKNY and Kenneth Cole, she said.
Claiborne continues to be on the prowl for new marketing opportunities, and to help stake out new niches Claiborne late last year commissioned Applied Research & Consulting to spend $1 million on a comprehensive consumer study. The study tracks consumer shopping habits, as well as preferences for brands and retail environments.
A similar study was conducted four years ago and helped Claiborne redevelop its in-store fixture program, which is more user-friendly, said Al Shapiro, vice president of corporate marketing.
Results of the current study, which polled thousands of consumers through focus groups, mall intercepts and telephone interviews, will be available in June, he said. He added that one of the major findings that’s emerging is that the cross-shopping trend is only getting stronger.
“[Consumers] are not channel loyal,” Shapiro said.
Tempering the upbeat mood of the meeting was Gary Brouse, director of Diversity, Indigenous Issue and Community Economic Development, a New York-based Native American watchdog organization, which has been lobbying against Claiborne since 1998 to discontinue the use of the Crazy Horse label. The sportswear label, which is sold exclusively to J.C. Penney, is “offensive” to the Lakota tribe, part of the Sioux nation, Brouse said.
“This is a serious issue with the Indian community,” said Brouse.
The company had offered to change the name to Crazy Horses, Brouse said, but it was rejected by his group.
The brand, which Claiborne purchased in 1992, was developed in the early Sixties and has “never been associated with North American iconography,” Charron said.
However, Charron said the company is working hard to develop a resolution to the issue and added, “We are open to dialog.”