- The Washington Times - Thursday, July 12, 2007

NEW YORK (AP) — Liz Claiborne Inc. is undergoing a major fashion makeover, pegging its future to fewer but more powerful brands with names like Juicy Couture and Lucky Brand Jeans.

The New York-based apparel maker, facing a declining department store business and changing consumer tastes, announced plans yesterday to cut as many as 800 jobs, or up to 9 percent of its work force, and is considering whether to sell, license or shut down 16 brands.

The brands under review include Ellen Tracy, Dana Buchman and J.H. Collectibles and account for about $800 million of the company’s projected annual sales of $5 billion.

The moves are aimed at cutting costs and enabling the company to focus on its most profitable fashion lines.

The plan, spearheaded by Chief Executive Officer William L. McComb, a former pharmaceutical executive who took the helm eight months ago, contrasts with the acquisition binge Claiborne pursued over the past decade.

That led to dramatic sales growth and a diversified portfolio but also resulted in a fuzzy focus and missed opportunities.

“We overplayed what was once an effective strategy,” Mr. McComb told an investor conference. “We are at a turning point. Everything we do will be centered on one key principle: building powerful brands.”

Under the restructuring plan, Liz Claiborne expects to save $100 million in 2008 and an additional $90 million over the following two years. The company projects annual revenue growth in the high-single digits and earnings per share growth in the high teens over the long term.

Its shares rose 33 cents to $37.56 in trading yesterday.

Retail analyst Jennifer Black said Claiborne executives “have to change the model,” but execution could be challenging.

“There are a lot of moving parts to this business,” Ms. Black said.

Claiborne and rivals such as Jones Apparel Inc. face pressure from consolidation in the traditional department store industry, which is placing higher financial demands on its suppliers. Department stores are offering more store-label merchandise, squeezing out apparel makers’ brands. Consumers, meanwhile, are less likely to buy an ensemble from a single designer, preferring separates from various brands.

As part of the overhaul, Mr. McComb said Claiborne will think more like a retailer, delivering fashion more quickly, focusing on leaner inventory management and increasing sales in the stores.

Last month, Claiborne laid the groundwork for the restructuring by announcing moves to separate the company into two divisions: retail, which the company calls direct brands, and its wholesale-based partnered brands.

The company said Claiborne’s future growth will be fueled by four labels: Kate Spade, Juicy Couture, Lucky Brand Jeans and Mexx. Sales of these brands are expected to grow from about $2.2 billion this year to $3 billion by 2010 as the company doubles its marketing spending and expands the number of stores in the United States and abroad.

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