A

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.

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.

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/highlite or 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