Liz Claiborne, Inc.

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Liz Claiborne, Inc.

1441 Broadway
New York, New York 10018
U.S.A.
(212) 354-4900
Fax: (212) 719-9049

Public Company
Incorporated: January 19, 1976
Employees: 8,000
Sales: $2.19 billion
Stock Exchanges: New York
SICs: 2339 Women’s & Misses’ Outerwear, Nec; 2335 Women’s & Misses’ Dresses; 2389 Apparel & Accessories, Nec; 2329 Men’s & Boys’ Clothing, Nec; 2331 Women’s & Misses’ Blouses and Shirts; 2337 Women’s & Misses’ Suits and Coats; 2253 Knit Outerwear Mills; 5632 Women’s Accessory and Specialty Stores

Since its inception in 1976, Liz Claiborne, Inc. has grown to be the largest women’s apparel manufacturer in the world. The company designs and markets a complete line of sportswear, professional clothing, costume jewelry, accessories, and cosmetics under the labels Liz Claiborne, Elisabeth, Liz & Co., and Dana Buchman. It also designs sportswear and accessories and markets fragrances for men under the Claiborne label. Products are manufactured through contracts with independent factories in 50 nations and are marketed through prominent department and specialty stores worldwide. The company is expanding rapidly overseas, pushing its clothes into such elegant European retailers as Harrod’s and Selfridge’s.

Elisabeth “Liz” Claiborne was born in Brussels and raised in Europe and New Orleans. Her natural artistic flair led toward her goal of becoming a fashion designer. At age 20 she got her first break when she won a design contest sponsored by Harper’s Bazaar magazine. Soon after that, she was employed as a sketcher and model in New York’s garment district and worked her way through the ranks at several design firms. After working for 16 years as the chief designer in Jonathan Logan’s Youth Guild division, she realized that the working woman needed more wardrobe options. Unable to sell the concept of stylish, sporty, and affordable clothes for America’s working woman to her employer, Claiborne left the company and joined her husband, Arthur Ortenberg, and another partner, Leonard Boxer, to found Liz Claiborne, Inc. in 1976. The three pooled $50,000 in savings and borrowed an additional $200,000 from friends and family to launch the company specializing in fashionable, functional, and affordable women’s apparel. Shortly thereafter, Jerome Chazen joined the trio. The company showed a profit its first year and became the fastest growing, most profitable U.S. apparel company in the 1980s.

Claiborne’s timing was perfect; she began providing career clothes to women just as they started entering the work force in record numbers. As Jerome Chazen stated in Fortune, “We knew we wanted to clothe women in the work force. We saw a niche where no pure player existed. What we didn’t know was how many customers were out there.” Clothes designers had not fully exploited one of the largest growing groups in America—women baby-boomers penetrating the labor market. Liz Claiborne ignored the traditional industry seasons of spring and fall, opting instead for six selling periods, including pre-spring, spring I, spring II, summer, fall, and holiday, to provide consumers with new styles every two months. These short cycles allowed more frequent updates of new styles and put clothes on the racks in the appropriate season. By adding cycles, stores cut their inventory costs and overseas suppliers were able to operate more efficiently with the two extra cycles filling their slack periods. Liz Claiborne also made the decision not to field a traveling sales force. This determination, although disregarding conventional industry wisdom, stimulated the company’s rapid growth. With virtually no overhead, Liz Claiborne was set for swift growth as sales skyrocketed.

Liz Claiborne is greatly concerned with listening to its customers. At the company’s back-office operation in North Bergen, New Jersey, $10 million worth of IBM computers spit out information on sales trends throughout the country. This automated inventory network allows quick response to market demand. In addition to this network, Liz Claiborne employs about 150 specialists to solicit feedback from customers at stores around the country and 21 consultants who make sure that clothes and displays are arranged in stores according to company diagrams. Ninety-five customer service telephone operators field questions from retailers.

During the 1980s Liz Claiborne evolved from a basic sportswear business to a multifaceted fashion house. By the early 1990s, it boasted 19 divisions and three licensees, whereas in 1980 it had just one division. The company went public in 1981 at $19 per share, raising $6.1 million. A petite sportswear division was introduced in 1981, and a dress division was added in 1982. A 1984 foray into girls’ clothes failed by 1987. Four new divisions were launched in 1985, including Claiborne, the company’s expansion into men’s clothing. Liz Claiborne discovered that 70 percent of its women customers were also purchasing clothing for their husbands. Also created in 1985 was the accessories division, which was formerly a licensee. Some components of this line include leather handbags, small leather goods, and bodywear.

The company further expanded and introduced its signature scent in September of 1986. The cosmetics division began as a joint venture with Avon Cosmetics Ltd., and in 1988 the company regained full rights to the line. This division has since marketed a new fragrance, Realities, and the Claiborne fragrance for men. In the fall 1993, the group introduced Vivid, its third women’s fragrance. The year 1988 also marked an important milestone for Liz Claiborne, Inc. After only ten years, the company was on Fortune’s list of the top 500 industrial companies. It was one of only two companies started by a woman to achieve that distinction. Also, as an 11-year old enterprise, it was one of the youngest companies ever to make the cut.

In 1989 the Dana Buchman division was launched. This division specializes in a line of higher-priced women’s career clothes created for the bridge market. Its prices span the difference between moderately priced ready-to-wear sportswear and designer creations. In mid-1987, however, a slump hit the apparel business. Retail sales stalled in early 1988, inventories increased, and operating margins narrowed. In 1988, for the first time ever, Liz Claiborne’s net earnings fell—by an estimated 11 percent, to $102 million. After years of 20 percent increases, sportswear sales increased only about three percent in 1988. Sales gains were getting hard to come by.

Searching for new avenues, Liz Claiborne focused on a long-overlooked group of consumers and introduced its Elisabeth division specializing in apparel for larger women. The line offered everything from career clothing and activewear to social occasion dressing. The line has been very well received and is a market leader. Sales rose 23.4 percent to $161 million in 1992. More important, in 1988 the company moved into the retail apparel business when it opened its first retail stores, offering the First Issue brand of casual women’s sportswear. This break into apparel retailing was an expensive and highly risky proposition. Thirteen stores were launched that year and the company showed that it could be successful in this type of diversification. It currently operates 40 First Issue specialty stores throughout the United States and planned to add 16 more stores, mostly in 1993.

The company opened its first Liz Claiborne stores in 1989. These 18 stand-alone stores are placed in affluent suburban malls and serve as laboratories for the company to test new designs and product presentations. They provide the company with immediate information regarding market trends through state-of-the-art bar coding and other electronic data interchange systems. Three Elisabeth stores were also opened serving the larger-sized consumer. Overall, sales of the retail division rose 20 percent to $92.9 million in 1992. In addition, the company operates 55 factory-outlet stores that market unsold inventory from past seasons. Sales achieved record levels in this area also, up 34.5 percent to $113.9 million. Liz Claiborne positions these outlets at a distance from the stores where its products are customarily sold.

In addition to the company stores, Liz Claiborne dominates the selling floors of major department stores—sometimes more than half the allotment for women’s apparel. Because profits and volume have increased for Liz Claiborne, so has its influence at the manufacturing and retail ends of the business. The company does not own any factories; all of its merchandise is made through contracts with independent factories in 50 nations. The company has reduced its reliance on Hong Kong, South Korea, and Taiwan in favor of countries like Malaysia, China, and Sri Lanka, where labor is less expensive. Less than ten percent of Liz Claiborne’s products are made in the United States. There are drawbacks, though, to not owning the factories. To ensure that goods are produced to the high standards consumers expect, Liz Claiborne employs an overseas staff of almost 700 who regularly visit the factories.

At the retail end, Liz Claiborne commands extensive clout. The company has a rigid noncancellation policy, meaning that if spring merchandise does not sell well in stores, retailers are still unable to cut summer orders. But Liz Claiborne does generate what is known as strong “sell through.” Its clothes are rarely marked down—only about five percent of its merchandise versus the industry norm of 15 percent. To reduce the risk of markdowns the company produces fewer goods than the level of demand forecast. Therefore, retailers get better profit margins and allow Liz Claiborne more space on the floor. But because of limited space in department store floors, the company is expanding abroad. In 1988 sales and marketing efforts began in Canada. In January of 1991 Liz Claiborne, Inc. entered Great Britain, and later in the year it was introduced into Spain. Merchandise is also sold to stores in the United Kingdom, Ireland, and the Netherlands. Liz Claiborne has tailored its strategies when marketing its products outside the United States. In some United Kingdom stores, the company leases space and sells the product itself. In Japan, it markets through a mail-order catalog, and in Singapore Liz Claiborne has granted a retail license for the operation of Liz Claiborne stores. This strategy seems to be working well as international sales totaled $108.1 million in 1992, while only six years ago $1.4 million of sales came from outside the United States.

The greatest challenge to the company came in 1989, when Liz Claiborne and Arthur Ortenberg announced they would resign from active management in order to pursue philanthropic interests. They established the Liz Claiborne and Art Ortenberg Foundation, a private organization dedicated to protecting wildlife and the environment. This foundation also serves the needs of the public through programs in the fields of human services, the environment, health care, the arts, and education.

The company was not damaged by the founders’ departure. A broad array of new products has been introduced, including jewelry and sport shoes. Liz Claiborne further expanded its business to women’s and men’s optical frames, eyewear (fashion sunglasses and readers), and women’s hosiery through licensing, and these revenues continue to climb. Tailored suits for the working woman debuted in 1991. This division is expected to generate sales of $100 million within five years. In May of 1992 Liz Claiborne acquired three new labels from the bankrupt Russ Togs. Crazy Horse is casual wear marketed in department and specialty stores. Russ offers updated career and casual apparel and is sold in moderate areas of department stores. The Villager is offered in national and regional chain department stores. This line focuses on career clothing and some casual wear. These and future acquisitions will broaden the company’s distribution and will allow opportunities for expanding clothing lines and creating new products.

Although sales for 1992 increased 9.3 percent to a record $2.2 billion and the company’s ten percent return on net sales remains one of the highest in the apparel industry, Liz Claiborne is not satisfied with past accomplishments. While the number of working women between the ages of 25 and 54 grew 43 percent in the 1980s, this demographic group will increase only about 25 percent during the 1990s. The company needed to become more visible in order to maintain market share. The combination of recession, increased competition in moderately priced sportswear, and the push into new markets have led Liz Claiborne to seek a higher profile. In October of 1991, the company launched its first print advertising campaign for apparel and accessories.

Liz Claiborne realized that cooperative advertising with retailers and its domination of department store floors was not enough anymore. Instead, the company needed to solidify its fashion image and create a global corporate image. Advertising is critical if the company is to preserve strong relationships with consumers and retailers. Also, Liz Claiborne cannot expect to gain a foothold in Europe with an unadvertised fashion brand. Since floor space in Europe is much more limited, a company needs to advertise its image to get into the stores. Liz Claiborne does have an advantage in that the company stands for quality, value, and fit—exactly the standards of the Europeans and Japanese.

Liz Claiborne’s $6 million advertising campaign broke in the November 1991 issues of 15 consumer publications, including HG, Vanity Fair and Elle. The ad campaign is just part of Liz Claiborne’s objective to increase visibility. In the fall of 1991, the company originated Women’s Work, a philanthropic enterprise pairing women artists and writers with community groups in projects addressing domestic violence and work/family conflicts. For example, in Chicago, children’s author Leah Komaiko collaborated with a group of city kids to write a book on working mothers. It is distributed through Reading Is Fundamental (RIF), schools, libraries, and reading programs.

The company that Liz built is noted for its well-organized management, distribution, and sales teams. In an industry where turmoil is a tradition, Liz Claiborne has cultivated a strong team to run every aspect of the business. The company has continued to meet industry challenges by following four guidelines it has instilled from its beginning: listen to consumers; create first-class products addressing their needs; price products with the consumer in mind; and always try to do more, and do it better. In 1992 Fortune once again named Liz Claiborne, Inc. as one of the ten most admired corporations in America, further reinforcing that the company has indeed achieved success and will continue to thrive into the 1990s.

Principal Subsidiaries

Claiborne Limited (Hong Kong); Liz Claiborne Cosmetics, Inc.; Liz Claiborne Accessories, Inc.; Liz Claiborne Accessories-Sales, Inc.; Liz Claiborne Export, Inc.; Liz Claiborne Foreign Holdings, Inc.; Liz Claiborne International, Ltd. (Hong Kong); Liz Claiborne (Israel) Ltd.; Liz Claiborne (Italy) Inc.; L.C. Licensing, Inc.; Liz Claiborne Sales, Inc.; Liz Claiborne-Texas, Inc.; LCI Investment, Inc.; LCI Holding, Inc.; Liz Claiborne (Canada) Limited; Liz Claiborne, S.A. (Costa Rica); L.C. Caribbean Holdings, Inc.