Reshaping Claiborne: Liz Faces Challenges Selling Off 16 Brands

After a decade of frenzied acquisitions, Liz Claiborne Inc. is having a garage sale of many of its brands.

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But John Henderson, a director at Net Worth Solutions Inc. and a former president of Kellwood Co.'s Sag Harbor division, questioned McComb's decision to announce the sale of the brands before securing buyers.

"I just can't think why you would want to upset your organization with that announcement," Henderson said. "Why come out publicly and put all your inventory on the table?"

Henderson said the brands' uncertain future creates both internal and external problems.

"First, how do you keep your best people on board for a very long time?" Henderson mused. "Second, if you are a current customer with those labels, what is your relationship now? Department stores will decide whether they will continue with the brands and, if they do, they will issue certain requirements."

Industry sources expect eight types of potential buyers will come out of the woodwork:

- Retailers: In addition to the four moderate retail exclusive brands, stores may be looking to make other brands on the list their own. While a vendor like Claiborne may not be able to wholesale these brands profitably, retailers — which increasingly are searching for private and exclusive brands — can capitalize on vertical structure.

- Strategic competitors like VF Corp., Jones Apparel Group and Kellwood Co.: VF has shown interest in active and outdoor companies, and Prana could be a good fit. Kellwood could wholesale Enyce to the same retailers it targets with Baby Phat and Phat Farm, or pick up some small, higher-end brands that it has been favoring in its acquisition strategy.

Jones may finally find a low enough price to enter the contemporary market with C&C California, Mac & Jac or Kenzie, or Dana Buchman and Ellen Tracy could create economies of scale with Anne Klein. But Marc Cooper, managing director at investment banking firm Peter J. Solomon Co., doubts the 16 brands Claiborne is reviewing are "strategic buys" that Claiborne's traditional competitors would be interested in. He referenced VF selling Vanity Fair Intimates to Fruit of the Loom earlier this year and Jones' decision to sell its smaller, moderate brands.

"The big apparel companies are coming of age and these larger companies trimming their portfolios will be a continuing theme as they move into their next phase," Cooper said. "The nature of any business is that you have some performers and some laggers. You prune the tree to become more beautiful."

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