CLAIBORNE GETS COURT APPROVAL TO BUY BANKRUPT MONET GROUP
Byline: Anne D’Innocenzio / With contributions from Wendy Hessen
NEW YORK — Liz Claiborne Inc. is adding yet another brand to its diversified portfolio.
The $2.8 billion giant said Monday that it has received bankruptcy court approval Friday to acquire the majority of the assets of Monet Group Inc., the 63-year-old manufacturer of costume jewelry that has fallen on hard times.
Claiborne’s purchase price beat the bid by Monet Acquisition Group, which offered $42.5 million, including the assumption of debt. At Friday’s bidding auction, Claiborne bid $44 million plus the value of the Monet building in Rhode Island, according to Michael Sharp, vice chairman and chief operating officer of Monet. The winning bid gives creditors two options: a $44 million bid for notes and cash or an outright $39.5 million cash offer.
For the purchase price, Claiborne receives prepaid assets, fixed assets, accounts receivable and inventory, according to Paul R. Charron, chairman of Claiborne.
“This was a better offer,” said Sharp. He added that given the competitive costume jewelry environment, it was necessary to be acquired by a major company to “survive long term.” Charron acknowledged that Monet has had its share of problems, but he sees big potential in the Monet brand.
“The tactics were off. It was undercapitalized, but it is an excellent brand,” said Charron.
He pointed out that the acquisition of Monet, whose sales are expected to hit $75 million this year, will strengthen Liz Claiborne’s position as a leader in the fashion jewelry market. Approximately 60 percent of Monet’s business is sold through department stores; sales from popular-priced chains accounted for 15 percent of last year’s business. International accounted for 25 percent of the business. Jewelry under the Liz Claiborne label generated about $60 million last year, up from $20 million in 1996. The company is also launching jewelry lines under its First Issue and Villager labels.
Monet, whose trademark is classic career, is expected to complement Claiborne’s fine jewelry offerings, whose image is more modern, according to Charron.
Monet is also priced about 20 percent higher than Liz Claiborne jewelry. Liz Claiborne earrings, for example, range in price at retail from $10 to $18, while Monet’s range from $12 to $24, according to Helen Welsh, president of Liz Claiborne accessories.
Charron pointed out that Monet’s established international business in such markets as Europe, Latin America and Asia will give Claiborne’s jewelry business entry into those markets. About 5 percent of Liz Claiborne’s jewelry business is international.
Liz Claiborne’s accessories business is $200 million.
Charron foresees low-single-digit annual increases for Monet, but that could change once the lines are fully remerchandised.
“We want to give the lines more focus,” said Charron. “[Monet] tried to appeal to different attitudes. The brand was stretched too far.”
Welsh added, for example, that the brand tried to get into stretch bracelets — a trendy item — last spring, merchandising them next to classic gold necklaces.
“There was a disconnect among its products,” she said.
The plan, said Charron, is to evaluate its management and remerchandise its lines by next spring. Changes in the product line will be evident for the August and September markets.
Monet, founded in 1937 during the height of a major costume jewelry craze, is ranked the number-one brand in department stores in jewelry, but it has seen its market share erode over the past couple of years due to myriad struggles, including a liquidity crisis, an ongoing shuffle in its senior management and an inability to keep pace with the rapidly changing retail environment, according to observers.
Besides the Monet brand, the company has the mass brands Trifari and Marvella.
In 1994, while in the midst of its first term in Chapter 11 bankruptcy protection, Judy Harrison signed on as chief executive officer. She cut stockkeeping unit’s, upgraded systems and consolidated its production in one plant in East Providence, R.I., but also attempted to launch a Monet leather goods business that folded after one week.
Harrison was replaced in 1997 by Robert Mang, who had been vice chairman of DFS Group.
During Mang’s tenure, department store costume jewelry faced many challenges, to which Monet repeatedly seemed unable to respond. Fine jewelry became more affordable from specialty chains such as Tiffany and Zales. Mass merchants like Wal-Mart and Target were also getting into fashion jewelry, taking away market share from department stores. In the last year, quality has suffered, as the firm’s production was shifted from domestic to overseas, according to sources. It still owns the Rhode Island manufacturing facility.
For the second time in seven years, Monet filed for Chapter 11 bankruptcy protection in Delaware on May 11, where its estimated liabilities were more than $100 million and assets were listed between $50 million and $100 million.
Claiborne has been on a massive acquisition streak in the past year or so, buying or obtaining licenses to such brands as Kenneth Cole, Laundry, Sigrid Olsen, DKNY Jeans, Active and Juniors and Lucky Brands.