Liz Claiborne, Inc.

views updated May 18 2018

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 Womens & Misses Outerwear, Nec; 2335 Womens & Misses Dresses; 2389 Apparel & Accessories, Nec; 2329 Mens & Boys Clothing, Nec; 2331 Womens & Misses Blouses and Shirts; 2337 Womens & Misses Suits and Coats; 2253 Knit Outerwear Mills; 5632 Womens Accessory and Specialty Stores

Since its inception in 1976, Liz Claiborne, Inc. has grown to be the largest womens 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 Harrods and Selfridges.

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 Harpers Bazaar magazine. Soon after that, she was employed as a sketcher and model in New Yorks garment district and worked her way through the ranks at several design firms. After working for 16 years as the chief designer in Jonathan Logans 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 Americas 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 womens 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.

Claibornes 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 didnt know was how many customers were out there. Clothes designers had not fully exploited one of the largest growing groups in Americawomen 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 companys 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 companys 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 companys expansion into mens 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 womens fragrance. The year 1988 also marked an important milestone for Liz Claiborne, Inc. After only ten years, the company was on Fortunes 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 womens 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 Claibornes net earnings fellby 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 womens 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 storessometimes more than half the allotment for womens 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 Claibornes 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 downonly 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 womens and mens optical frames, eyewear (fashion sunglasses and readers), and womens 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 companys 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 companys 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 fitexactly the standards of the Europeans and Japanese.

Liz Claibornes $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 Claibornes objective to increase visibility. In the fall of 1991, the company originated Womens 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, childrens 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.

Further Reading

Appelbaum, Cara, Stepping Out, Adweeks Marketing Week, November 18, 1991, pp. 2021.

Deveny, Kathleen, Can Ms. Fashion Bounce Back, Business Week, January 16, 1989, pp. 6470.

Cannes, Stuart, Americas Fastest-Growing Companies, Fortune, May 23, 1988, pp. 2840.

Hass, Nancy, Like A Rock, Financial World, February 4, 1992, pp. 2224.

Liz Claiborne, Inc. Annual Reports, New York: Liz Claiborne, Inc., 199192.

Sellers, Patricia, The Rag Trades Reluctant Revolutionary, Fortune, January 5, 1987, pp. 3638.

Zinn, Laura, Liz Claiborne Without Liz: Steady As She Goes, Business Week, September 17, 1990, pp. 7074.

Carol Kieltyka

Liz Claiborne, Inc.

views updated Jun 08 2018

Liz Claiborne, Inc.

1441 Broadway
New York, New York 10018
U.S.A.
(212) 354-4900
Web site: http://www.lizclaiborne.com

Public Company
Incorporated:
1976
Employees: 7,000
Sales: $2.41 billion (1997)
Stock Exchanges: New York
Ticker Symbol: LIZ
SICs: 2339 Womens & Misses Outerwear, Not Elsewhere Classified; 2335 Womens & Misses Dresses; 2389 Apparel & Accessories, Not Elsewhere Classified; 2329 Mens & Boys Clothing, Not Elsewhere Classified; 2311 Mens & Boys Suits & Coats; 2844 Toilet Preparations; 2331 Womens & Misses Blouses and Shirts; 2381 Fabric Dress & Work Gloves; 2211 Broadwoven Fabric MillsCotton; 3100 Leather & Leather Products: 2337 Womens & Misses Suits and Coats; 2253 Knit Outerwear Mills; 5632 Womens Accessory and Specialty Stores; 3021 Rubber & Plastics Footwear; 3144 Womens Footwear Except Athletic

Liz Claiborne, Inc. is one of Americas leading apparel companies. The founders led the company through spectacular growth in the 1980s, but business weathered the doldrums in the early 1990s following their retirement from active management. An aggressive revitalization plan helped put the sheen back on the Liz Claiborne name as it headed toward the new millennium.

Finding a Niche: 1970s

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
Harpers Bazaar magazine. Soon after that, she was employed as a sketcher and model in New Yorks garment district and worked her way through the ranks at several design firms. After serving for 16 years as the chief designer in Jonathan Logans 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 Americas 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 womens 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.

Claibornes 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 didnt know was how many customers were out there. Clothes designers had not fully exploited one of the largest growing groups in Americawomen 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, though disregarding conventional industry wisdom, stimulated the companys rapid growth. With virtually no overhead, Liz Claiborne was set for swift growth as sales skyrocketed.

Phenomenal Growth Through the Late 1980s

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 companys expansion into mens 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 included leather handbags, small leather goods, and bodywear.

The company further expanded and introduced its signature scent in September 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 of 1993, the group introduced Vivid, its third womens fragrance.) The year 1988 also marked an important milestone for Liz Claiborne, Inc. After only ten years, the company was on Fortunes 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 specialized in a line of higher-priced womens career clothes created for the bridge market. Its prices spanned 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 Claibornes net earnings fellby 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.

Breaking New Ground Through the Early 1990s

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 was very well received and gained market leadership. Sales rose 23.4 percent to $161 million in

1992. More importantly, in 1988 the company moved into the retail apparel business when it opened its first retail stores, offering the First Issue brand of casual womens 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 operated 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 were placed in affluent suburban malls and served as laboratories for the company to test new designs and product presentations. They provided 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 operated 55 factory-outlet stores that marketed unsold inventory from past seasons. Sales achieved record levels in this area also, up 34.5 percent to $113.9 million. Liz Claiborne positioned these outlets at a distance from the stores where its products were customarily sold.

As profits and volume increased for Liz Claiborne, so did its influence at the manufacturing and retail ends of the business.

In addition to the company stores, Liz Claiborne dominated the selling floors of major department storessometimes more than half the allotment for womens apparel. The company did not own any factories, but made all of its merchandise through contracts with independent factories in 50 nations. The company reduced its reliance on Hong Kong, South Korea, and Taiwan in favor of countries like Malaysia, China, and Sri Lanka, where labor was less expensive. Less than ten percent of Liz Claibornes products were made in the United States. There were drawbacks, though, to not owning the factories. To ensure that goods were produced to the high standards consumers expected, Liz Claiborne employed an overseas staff of almost 700 who regularly visited the factories.

Company Perspectives:

We are committed to maintaining a consumer dedicated and design oriented company that respects the unique relationship between the consumer and our products. Our commitment ensures that, throughout our operation we pay enormous attention to details both aesthetic and technical. Consumer satisfaction guides all our efforts. Through quality, value, service, and fashion leadership, original and innovative ideas will ensure that our products continue to meet the needs of our customers.

At the retail end, Liz Claiborne commanded extensive clout. The company had a rigid noncancellation policy, meaning that if spring merchandise did not sell well in stores, retailers were still unable to cut summer orders. But Liz Claiborne generated what was known as strong sell through. Its clothes were rarely marked downonly about five percent of its merchandise versus the industry norm of 15 percent. To reduce the risk of markdowns the company produced fewer goods than the level of demand forecast. Therefore, retailers got better profit margins and allowed Liz Claiborne more space on the floor. But because of limited space in department store floors, the company expanded abroad. In 1988 sales and marketing efforts began in Canada. In January 1991 Liz Claiborne, Inc. entered Great Britain, and later in the year it was introduced into Spain. Merchandise was also sold to stores in the United Kingdom, Ireland, and the Netherlands. Liz Claiborne tailored its strategies when marketing its products outside the United States. In some United Kingdom stores, the company leased space and sold the product itself. In Japan, it marketed through a mailorder catalog, and in Singapore Liz Claiborne granted a retail license for the operation of Liz Claiborne stores. This strategy seemed to work well as international sales totaled $108.1 million in 1992, while only six years earlier $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 served the needs of the public through programs in the fields of human services, the environment, healthcare, the arts, and education.

The status quo continued after the founders departure: Chazen, who had been with the company since the early days, was named chairman. A broad array of new products was introduced, including jewelry and sport shoes. Liz Claiborne further expanded its business to womens and mens optical frames, eyewear (fashion sunglasses and readers), and womens hosiery through licensing, and these revenues continued to climb. Tailored suits for the working woman debuted in 1991. This division was expected to generate sales of $100 million within five years. In May 1992 Liz Claiborne acquired three new labels from the bankrupt Russ Togs Inc. Crazy Horse casual wear was marketed in department and specialty stores. The Russ line offered updated career and casual apparel and was sold in moderate areas of department stores. The Villager line was offered in national and regional chain department stores and focused on career clothing and some casual wear. These and future acquisitions were expected to broaden the companys distribution and allow opportunities to expand clothing lines and create new products.

Although sales for 1992 increased 9.3 percent to a record $2.2 billion and the companys ten percent return on net sales remained one of the highest in the apparel industry, Liz Claiborne faced changing demographics. While the number of working women between the ages of 25 and 54 grew 43 percent in the 1980s, this would 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 led Liz Claiborne to seek a higher profile. In October 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 was critical if the company was to preserve strong relationships with consumers and retailers. Also, Liz Claiborne could not expect to gain a foothold in Europe with an unadvertised fashion brand. Since floor space in Europe was much more limited, a company needed to advertise its image to get into the stores. Liz Claiborne did have an advantage in that the company stood for quality, value, and fitexactly the standards of the Europeans and Japanese.

Liz Claibornes $6 million advertising campaign broke in the November 1991 issues of 15 consumer publications, including HG, Vanity Fair, and Elle. The ad campaign was just part of Liz Claibornes objective to increase visibility. In the fall of 1991, the company originated Womens 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, childrens author Leah Komaiko collaborated with a group of city kids to write a book on working mothers. It was distributed through Reading Is Fundamental (RIF), schools, libraries, and reading programs.

Liz Claiborne was greatly concerned with listening to its customers. At the companys 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 allowed quick response to market demand. In addition to this network, Liz Claiborne employed about 150 specialists to solicit feedback from customers at stores around the country and 21 consultants who made sure that clothes and displays were arranged in stores according to company diagrams. Ninety-five customer service telephone operators fielded questions from retailers.

The company that Liz built was noted for its well-organized management, distribution, and sales teams. In an industry where turmoil is a tradition, Liz Claiborne cultivated a strong team to run every aspect of the business. The company met industry challenges by following four guidelines it had 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.

Changing Fortunes During the 1990s

With $2.2 billion in sales and products in over 10,000 stores, Liz Claiborne was the largest womens apparel manufacturer in the world. But the companys fortunes dramatically shifted in 1993. For the first time in the companys history, sales fell for the core Liz Claiborne Collection, Lizsport, and Lizwear lines. Net income fell 42 percent for the year. Some $300 million worth of merchandise went unsold. Business as usual was not working anymore. Thats too bad, because the old life was pretty good. In its heyday, Claiborne was regarded as the smartest, most efficient apparel outfit around, wrote Laura Zinn in a May 1994 Business Week article. When people were hired away from Claiborne, their new employers thought they were getting some magic, says one ex-executive. Between 1985 and 1991, sales and net income almost quadrupled.

Critics said Liz Claiborne apparel had gone stale since the departure of the founder. Saks Fifth Avenue dropped the Claiborne core sportswear lines in 1993, and the new mass market lines (Crazy Horse, Russ, and Villager) remained unprofitable. The company depended on just four department stores (Dillards, May, Macys, and Federated) for nearly half of its sales. Profits fell to $83 million in 1994 from a peak of $223 million in 1991.

Paul R. Charron, who moved from VF Corp. to Liz Claiborne in 1994 and was appointed CEO in 1995, led a restructuring drive: 500 of the companys 8,000 employees were laid of in 1995 and the unprofitable First Issue chain was closed. Charron then implemented a three-year program to cut expenses by $100 million, reduce excess inventory by 40 percent, and shorten production and delivery cycles by 25 percent. A major investment in technology helped the company improve clothing design and track sales more closely.

Now Liz Claiborne is playing catch-up with a vengeance. The company, which has extremely deep pockets, and no debt, is marketing smartly cut silk suits and cocktail dresses as well as basic blue jeans and khaki pants, wrote Jill Jordan Sieder in a February 1996 U.S. News & World Report article. Theyre changing in all the right ways in a very tough environment, explains Jennifer Black Groves, a retail analyst at Black & Co. A few years ago, I would have called their clothes basic, boring, heavy on the polyester.... [Now] the word dowdy just isnt fair anymore. With its image for fashion flair on the mend, Liz Claiborne rolled out a $25 million advertising campaign in early 1996. Print ads, super models, television commercials, and outdoor advertising dovetailed with an updated in-store marketing program. Charron, who was named chairman in May 1996, had also relaunched product lines, sold off units to licensors, and added new products. Veteran merchandiser Denise V. Seegal came on board as president in October 1996. For the first time since 1992, Liz Claibornes largest unit, womens sportswear, registered sales increases on the year: up 10.8 percent to $1.23 billion. Dana Buchmans sales were boosted 38.5 percent to $188.7 million thanks to help from the Dana B. and Karan lines introduced in February 1996.

The announcement of a strategic licensing agreement with Donna Karan International Inc. in December 1997 marked the first time Liz Claiborne acted as a licensee rather than a licensor. The 15-year exclusive contract, under which Donna Karan would receive a minimum of $152 million in royalties, gave Liz Claiborne the right to source, distribute, and market DKNY Jeans and DKNY Active trademarks in the Western Hemisphere. Aided by cost reduction measures, operational improvements, and strong sales in core product areas, net sales for 1997 climbed to $2.41 billion and net income reached $185 million.

Trends for the Future

The special markets division, formed in 1996 to encompass the moderate and value-priced brands, marked its first profitable quarter in 1998. The relaunched First Issue line was being sold exclusively in Sears, while the Crazy Horse label was offered by J.C. Penney. The division, which also housed Russ, Emma James, and Villager lines, benefited from Charrons experience with VFthe company moved from department store to a mass merchant focus during his tenure there. Liz Claiborne placed these popular priced products in Wal-Mart and Kmart and regional department stores such as Kohls and Mervyns. Special market sales were $104 million in 1997 and expected to increase by 30 percent in 1998. With its DKNY licensing agreement in place, the company was banking on a variety of brands, from mass to bridge, to drive future growth.

Principal Subsidiaries

Claiborne Limited; 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.; L.C. Caribbean Holdings, Inc.; Liz Claiborne Shoes, Inc.; L.C. Service Company, Inc.; Liz Claiborne Europe; LCI-Claiborne Limited Partnership; Liz Claiborne do Brasil Ltda.; LC/QL Investments, Inc.; L.C. Dyeing, Inc.; L.C. Augusta, Inc.; Textiles Liz Claiborne Guatemala, S.A.: Liz Claiborne (Malaysia) SDN.BHD; Liz Claiborne B.V.; L.C. Special Markets, Inc.; Liz Claiborne Foreign Sales Corporation; Liz Claiborne Operations (Israel); Liz Claiborne Colombia Limitada; Liz Claiborne GmbH; Liz Claiborne De El Salvador., S. A., de C; L.C.I. Fragrances, Inc.; DB Newco, Inc.

Principal Divisions

Liz ClaiborneApparel; Liz ClaiborneNon-Apparel; Liz Claiborne, Inc.Additional Brands; DKNY; Special Markets; Liz Claiborne International; Liz Claiborne, Inc. Retail Group.

Further Reading

Appelbaum, Cara, Stepping Out, Adweeks Marketing Week, November 18, 1991, pp. 2021.

Deveny, Kathleen, Can Ms. Fashion Bounce Back, Business Week, January 16, 1989, pp. 6470.

DInnocenzio, Anne, Claiborne Tells Holders Good Times Ahead, WWD, May 15, 1998, pp. 2, 18.

Cannes, Stuart, Americas Fastest-Growing Companies, Fortune, May 23, 1988, pp. 2840.

Hass, Nancy, Like a Rock, Financial World, February 4, 1992, pp. 22-24.

Rotenier, Nancy, Niki and Me, Forbes, January 13, 1997, p. 96. Ryan, Thomas J., Dana Buchman Paces Claiborne Gains, WWD, April 2, 1997, p. 24.

, Karans Jeanswear Royalties Put at $152M over 15 Years, WWD, April 1, 1998, pp. 4,7.

Sellers, Patricia, The Rag Trades Reluctant Revolutionary, Fortune, January 5, 1987, pp. 3638.

Sieder, Jill Jordan, Liz Claiborne Gets Dressed for Success, U.S. News & World Report, February 26, 1996, pp. 5556.

Zinn, Laura, Liz Claiborne Without Liz: Steady As She Goes, Business Week, September 17, 1990, pp. 7074.

, A Sagging Bottom Line at Liz Claiborne, Business Week, May 16, 1994, pp. 5657.

Carol Kieltyka
updated by Kathleen Peippo

Liz Claiborne, Inc.

views updated Jun 08 2018

Liz Claiborne, Inc.

founded: 1976


Contact Information:

headquarters: 1441 broadway

new york, ny 10018 phone: (212)354-4900 fax: (212)626-1800 toll free: (800)578-7070 url: http://www.lizclaiborne.com

OVERVIEW

Liz Claiborne, Inc. is one of America's leading apparel companies. Its products are sold in department stores and speciality stores worldwide. The company designs and markets fashion apparel and accessories for women; fashion apparel and furnishings for men; and fragrances for men and women. According to the company's annual report, "Each division of the company responds to a different set of lifestyle needs or preferences among the millions of fashion consumers who are our customers." In addition to its divisions, the company's brand name has been licensed to manufacturers and marketers of women's shoes, bed and bath furnishings, optics, sunglasses, and men's suits.


COMPANY FINANCES

After a prolonged slump in the mid-1990s, Liz Clai-borne experienced a reversal of fortune. Earnings rose 69 percent in 1996, one of the best gains in the apparel business. Net sales were a record $2.2 billion, with steady gains in women's sportswear, Dana Buchman products, and the outlet stores. In 1997 Liz Claiborne set another record with net sales of $2.4 billion, and earnings per share of $2.65. In the first quarter of 1998, the turnaround continued with net sales of a record $656.0 million, compared with the same period in 1997 when sales were $596.6 million. In addition, strong sales increases were reported in the Casual Sportswear Group, which includes, LizSport, LizWear, and Liz & Co.

ANALYSTS' OPINIONS

Many analysts felt that management strategies at Liz Claiborne, Inc. were sound, and expected company sales and profits to grow. The Special Markets Group, a new moderate line of clothing introduced in Wal-Mart and Sears, Roebuck and Co. was expected to be especially profitable in the late 1990s. According to Raymond S. Cohen in Value Line Investment Survey, "Claiborne is committed to the expansion of all its labels in a multilevel strategy that aims to include appeal for all women."

HISTORY

Elisabeth Claiborne had spent 25 years designing women's clothes when Liz Claiborne, Inc. was founded in 1976. Claiborne waited until her son was 21 years old before starting the company so that he would not be adversely affected if the business failed. Her goal was to be a clothing designer, and to build a small, profitable business. Joined by Leonard Boxer, Jerome A. Chazen, and her husband, Art Ortenberg, each of these four original founders invested $50,000 in the company. Loans from family and friends provided an additional $200,000.

In 1981 Liz Claiborne, Inc. became a publicly traded company on the New York Stock Exchange under the symbol LIZ. With revenues of approximately $800 million in 1986, the company appeared on the Fortune 500 list of the top companies in America.

In 1994 Paul Charron became the chief executive officer of Liz Claiborne, Inc. In the same year, sales fell and profits dropped dramatically. Charron, a former navy officer, was quoted by Nancy Rotenier in Forbes as saying: "The navy taught me how to operate in a combat zone." Rotenier agreed, saying that "Liz Claiborne, Inc. was practically a combat zone when the naval-officer-turned-marketing executive was brought in from VF Corp. to run it in 1994." Extensive market research indicated that many of Liz Claiborne's fashions had not kept up with current trends, so new styles were introduced, and new products, such as watches and swimwear, were offered. An extensive advertising campaign was launched using supermodel Niki Taylor, which helped the company become one of the largest fashion apparel advertisers. The company used print sources as well as outdoor billboards and bus shelters to advertise its products.

The apparel industry was not growing. The company had to do everything it could to increase its competitiveness in order to gain as large a market share as possible. Charron worked to cut costs using newly introduced information-management technologies. Computer-aided design cut costs and reduced the amount of time it took to go from the design phase to actual products for sale.


STRATEGY

In the late 1990s growth in the retail industry continued to be sluggish. Liz Claiborne targeted moderate price department store markets through several special labels. Emma James, introduced in 1996, was a new moderate label to be sold in department stores. The label First Issue, which featured relaxed career and everyday wear, was to be relaunched and sold at Sears, Roebuck and Co. stores. The Russ label targeted budget conscious consumers at Wal-Mart stores.

In the company's 1997 annual report, chairman Paul Charron noted that the company was focused intently "on leveraging and extending our core competencies, employing new technologies and devoting ceaseless energy to make us the world's preeminent designer and marketer of fashion apparel and accessories." In practical terms, this included the opening of 461 LizView shops; the launching of the company's consumer web site, which featured an interactive wardrobe planner and a domestic and international store locator; and the Claiborne Changing Room, a mobile showroom in 10 cities that gave apparel tips to men.


INFLUENCES

Liz Claiborne began selling clothing in 1976, a time of growth and customer interest in apparel. Women were joining the work force in record numbers and looking for attractive, reasonably priced clothing to wear to work. The company filled this niche and was very successful through the 1980s. Claiborne clothing and accessories were sold in department stores throughout the country. Sales and profits soared. In the early 1990s this trend changed. Several factors contributed to a decline in fortunes for the company. First, the entire women's fashion business experienced a downturn. Customers were spending less money on clothing and showing more independence about adopting the latest fashion trends. Second, a more relaxed dress code was adopted in the work-place. Third, several competitors joined the market. Styles offered by Liz Claiborne, Inc. were often overshadowed by competitors. Claiborne work was inferior in some cases. According to Teri Agins and Wendy Bounds in the Wall Street Journal, "Earnings declined in 1993 and 1994—the year that one of Claiborne's most prestigious retail accounts, Saks Fifth Avenue, dropped the sportswear collection entirely. Saks deemed the clothes not fashionable enough and too widely available elsewhere."


CURRENT TRENDS

When Paul Charron became CEO of Liz Claiborne in 1994, he realized that strong measures would have to be employed to return the company to profitability. Sales had dropped from $2.2 billion in 1993 to less than $2.1 billion in 1995. Profits dropped to $83 million in 1994 from a high of $223 million in 1991. One of his first actions was to conduct market research to determine the changing shopping habits and needs of customers. An innovative approach was used to determine customer preferences by interviewing customers personally at shopping malls and in their homes.

In addition, Liz Claiborne, Inc. operated its own speciality stores throughout the world to keep in close touch with customers and current trends. After analyzing market research results, the company discovered that women's roles had shifted and that they wanted to simplify the way they dressed. More than anything else, women desired versatility in clothing—clothing that would go from home to work.

Cost-cutting measures were employed to increase profitability. Jobs were cut by 10 percent, and production was consolidated to give the company better control over the quality of it products and to speed up the time it took for products to reach the market. Technology also played a role in Liz Claiborne's success. Computer-aided design technology was used as was LizRIM, a retail inventory management system that allowed items selling very well to be replaced in stores while still in season. Sales rose 25 percent in stores where LizRIM had been installed. Management became much more flexible. Division managers were given greater decision-making authority so they could respond to fashion trends more quickly, and implement new fashion ideas.

FAST FACTS: About Liz Claiborne, Inc.


Ownership: Liz Claiborne, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: LIZ

Officers: Paul R. Charron, Chmn. & CEO, 55, $2,239,300; Denise V. Seegal, Pres., 44, $1,331,200; Jorge L. Figueredo, Sr. VP, Human Resources, 37; Samuel M. Miller, Sr. VP Finance & CFO, 60, $574,000

Employees: 7,500

Principal Subsidiary Companies: Liz Claiborne, Inc.'s principal subsidiaries are L.C. Special Markets, Inc.; Claiborne Ltd.; Liz Claiborne Accessories, Inc.; and Liz Claiborne Cosmetics, Inc.

Chief Competitors: As a manufacturer of women's clothing, Liz Claiborne competes with: Jones Apparel Group, Inc.; Rafaella; Tommy Hilfiger Corp.; Nautica Enterprises, Inc.; Ralph Lauren; Banana Republic; Gap Inc.; and Limited Inc.


Liz Claiborne felt that product presentation and the shopping experience were critical to success and instituted two new programs in those areas: LizEdge, a program designed to ensure that products are displayed attractively in stores and LizView, a program that enhances the retail area in which products are sold. Color schemes, fixtures, and signs are designed to attract customers and to suggest coordinated outfits.

Liz Claiborne and Donna Karan International Inc. signed a strategic licensing agreement in 1997 to market and distribute two lines of apparel, DKNY Jeans and DKNY Active throughout the Western Hemisphere. The alliance provided Liz Claiborne with the opportunity to reach new consumer segments. The company noted that megabrands, such as the DKNY line, were central to continued growth and market share gains.


PRODUCTS

Liz & Co., a line of petite clothing, was introduced in 1996, as well as dana b. & karen, the casual career clothing line of the Dana Buchman division. New products included swimwear and watches. Curve for women, and Curve for men were the company's newest fragrances. New designs included fitted jackets with zippers, stretch pants, and five-pocket jeans.

In 1997 the company introduced Liz Claiborne and Elisabeth swimwear and coats, and extended its line of home accessories to include table linens, placemats, napkins, and accessories. Dana Buchman Eyewear, featuring sunglasses with sophisticated styling, were introduced and marketed by Bausch & Lomb.

The company also relaunched the Crazy Horse brand of affordable casual clothing in 1997. The collection was to be available exclusively at J. C. Penney beginning in the Fall of 1998.


CORPORATE CITIZENSHIP

The company's charitable activities are coordinated through the Liz Claiborne Foundation, which works primarily in communities where the company's major facilities are located. They provide assistance to organizations that are involved in helping women and their families. Projects supported by the Foundation include providing educational opportunities for needy children; job training for disadvantaged women; and assisting women who are HIV-positive or have AIDS. The Foundation also provides support to a variety of cultural institutions to enhance the quality of the arts in communities around the country.

Employees of the company are encouraged to volunteer at local nonprofit organizations. An employee-matching-gifts program is used to encourage employees to support a variety of charitable interests.

Liz Claiborne, Inc. is also concerned about domestic and family violence. The program, Women's Work, was established in 1991 to educate and raise public awareness. This program uses billboards and radio announcements to raise awareness, and form partnerships with community groups and local retailers. In 1996 the company used well-known college athletes to deliver public service announcements that discouraged men from engaging in violence in relationships.


GLOBAL PRESENCE

To remain competitive, the company actively worked toward global expansion. By the mid-1990s, products were available in more than 50 countries on 6 continents. In 1995 international sales reached $138.2 million.

CHRONOLOGY: Key Dates for Liz Claiborne, Inc.


1976:

Liz Claiborne, Inc. is founded

1981:

The company goes public

1985:

Expands its line to include men's clothing

1986:

Launches its signature scent

1988:

Makes the Fortune 500 list—one of the youngest companies to make the list

1989:

Elisabeth Claiborne resigns from active management

1992:

Fortune names Liz Claiborne, Inc. one of the ten most admired corporations in America

1997:

Liz Claiborne and Donna Karan International sign a licensing agreement for marketing and distribution


Liz Claiborne products were available in Canada, Europe, Asia, and Central and South America by the late 1990s. A substantial portion of the company's products are manufactured by foreign companies. The company has partnerships with yarn mills and textile houses worldwide. Liz Claiborne, Inc. is a member of a Presidential Task Force that had been organized to set up voluntary standards for apparel factories in the United States and in foreign countries. These standards help to insure that apparel companies do not use "sweatshops"—places where employees work long hours for low wages and under poor working conditions—in the manufacturing of their products.


SOURCES OF INFORMATION

Bibliography

agins, teri, and wendy bounds. "a flashier liz claiborne fashions a turnaround." the wall street journal, 11 november 1996.

better, nancy marx. "the secret of liz claiborne's success." working woman, april 1992.

cowen, raymond s. "liz claiborne." value line investment survey, 2 february 1997.

d'innocenzio, anne. "charron's challenge: sending liz clai-borne back to the stars." wwd, 15 march 1995.

——. "the repackaging of liz claiborne." wwd, 6 november 1996.

gault, ylonda. "a liz for the '90s." crain's new york business, 30 september-6 october 1996.

greenhouse, steven. "voluntary rules on apparel labor proving elusive." the new york times, 1 february 1997.

liz claiborne annual report 1995. new york: liz claiborne, inc., 1995.

"liz claiborne-company report." merrill lynch capital markets, 22 october 1996.

liz claiborne home page, 29 may 1998. available at http://www.lizclaiborne.com.

rotenier, nancy. "niki and me." forbes, 13 january 1997.

sellers, patricia. "the rag trade's reluctant revolutionary." fortune, 5 january 1987.

sieder, jill jordan. "liz claiborne gets dressed for success." u.s. news & world report, 26 february 1996.


For an annual report:

on the internet at: http://www.lizclaiborne.com/highliteor write: liz claiborne inc., 1441 broadway, new york, ny 10018


For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. liz claiborne inc.'s primary sics are:

2329 men/boys' clothing, nec

2335 women/juniors/misses' dresses

2339 women/misses' outerwear, nec

2389 apparel & accessories, nec