This week, Liz Claiborne, Inc. announced that it was selling its namesake brand, as well as several others, to concentrate on its Juicy Couture, Lucky Brand, and kate spade brands. Unsurprisingly, the company also announced that it would be changing its name. We spoke to Liz Claiborne, Inc. CEO William McComb about the new company, his new strategy, and the direction of its core brands.
The High Low: The sale has been called “one of Liz Claiborne’s most transformative transactions.” Can you tell us more?
William McComb: It’s transformative for a lot of reasons. Anytime a company like ours sells their nameplate asset, it signals something huge. The Limited did it a few years ago, and other companies have done it recently. A sale like this is transformative because it clearly focuses us in the direction of our most profitable, highest growth, and most global brands. So the transformation is significant on the financial side
Ultimately, it’s a balance sheet transformation – we went from carrying way too much debt for an apparel company that’s competing in global markets that are pointing to signs of a recession, to a company with an appropriate level of debt in those circumstances. This move changes how investors look at our risk profile – we wind up becoming a truly different company, because we have a new risk profile and the new use of resources deployed toward high growth.
THL: How will the new focus on three global lifestyle brands help you drive the company to greater growth and success?
WM: The sale creates both the perception and the reality of “No further distractions.” Earlier this year, we announced we were selling a majority stake in Mexx. When you take that together with the transformations we just announced, we have a completely focused use of resources. It also creates the space for a more modern understanding of our company – people hear the name “Liz Claiborne” and they don’t really pay attention to what the company has done, and what’s underneath it. There are a lot of very contemporary, high-growth businesses here, and when you hear the name of a venerable company like Liz Claiborne, often it comes with some baggage – people think of a company that has had its heyday, as opposed to a company that’s hitting its prime.
THL: Can you tell us more about what’s next for Kate, Lucky and Juicy?
WM: A tremendous amount of growth initiatives, for one. We’ve begun executing a true global roll-out of the brands – we announced a marquee joint venture for kate spade in China, and we just opened the first kate spade store in London, which is the brand’s first entrée into Europe. We are rolling kate spade out in the Middle East, while Juicy is already in the Middle East, China, and other parts of Asia. We’re also significantly ramping up our Western European presence with Juicy. Plus, we’re increasing our square-footage opportunities here in the U.S.
Lastly, there has been tremendous talk and activity in our growth rate with e-commerce, for both Lucky and Juicy. These are brands that are sought out on the Internet, and are top search terms for other web-based retailers. We’ve invested a lot in sites, teams, and platforms that are building real online sales growth.
THL: If you were to add a new brand, what might be its look and feel? Where would it fit across the Kate-Lucky-Juicy spectrum?
WM: It wouldn’t. What all of these deals [including the recent sale of Liz Claiborne] were about is a fundamental belief that we have a tremendous pipeline within our brands – and we don’t need to add another one. Less is more in terms of brands. There are channel opportunities and product-category opportunities within any one of our existing brands. Lucky is introducing its children’s business this fall, Juicy’s children’s business is growing, and kate spade has huge opportunities to grow in the areas of bags, shoes and home.
THL: We know you aren’t ready to tell us the new name, but any hints on your thinking?
WM: Unfortunately I don’t have any hints. We didn’t get ahead of ourselves as far as the new name. People have been asking us about it for years, and there has been a lot of excitement, but no clues yet. But we’ll [rename] sooner rather than later — within a year, certainly.
THL: Any last thoughts to leave us with?
WM: The only other thing to add is that JC Penney is a great home for the Liz Claiborne brand. What we did smartly and carefully from ‘07 until now is build a partnership with JC Penney, and the Liz Claiborne brand became a square peg in a square hole – a brand that had superpower brand status executed with a partner that wanted it and wanted to make a big home for it. This move created a whole new momentum for the brand.
Now we are selling the brand to JC Penney, and we got more value for it than it was worth 3 years ago. Plus we put it in the hands of a partner that says it will soon be doing over $1 billion again in retail. I am pleased to say we kept our focus on the Liz Claiborne brand—and we established an incredible new home for it. So while I’m thrilled for the future of the brands that represent high growth for our shareholders, let me add we also found the perfect exit for the brand that started it all.
Companies aren’t supposed to go the way of the horse and buggy. They are supposed to reinvent–redeploying strengths and capabilities from a legacy business into new ones. That’s what we have done here. The Liz business gave us people, real estate, and category expertise that have helped the growth brands in a big way.