Liz Claiborne to Divest 16 of 36 Apparel Brands -- WSJ

Clothing retailer Liz Claiborne Inc., hit by downturns in department-store sales, has engaged boutique investment bank Centerview Partners to assist it in selling or licensing 16 of its 36 brands, according to a report in the Wall Street Journal. It is also cutting 8% of its non-retail work force (600-800 people) and reorganizing its management structure. The brands that are not sold or licensed might be kept by the company or discontinued. The brands to be divested are Sigrid Olsen, Prana, Ellen Tracy, Dana Buchman, Mac & Jac, Kensie, Intuitions, C&C California, Enyce, Laundry, Tint, Stamp10, First Issue, Emma James, Tapemeasure and J.H. Collectibles. Collectively, they account for approximately $800 million of the company's $5 billion in annual revenue. The divestiture represents an about-face from Liz Claiborne's decade-long strategy of acquiring as many brands as possible as a hedge against fashion cycles. "Post restructuring, Liz will transform from a merger and acquisition driven company to an organic growth story," said Credit Suisse analyst Omar Staad. New CEO William McComb is also expected to double ad spending for "power brands" Juicy Couture, Lucky, Mexx and Kate Spade, which are sold in Liz Claiborne's own stores.

Sources: Wall Street Journal, Reuters, MarketWatch, RTTNews, Fashion Television, New York Business
Commentary: Russell 1,000's Best, Worst Performing Stocks Since March 5 Bottom • Is Prudence Passé? Private Equity and LBO Cyclical Sector Targets • Liz Sets Sights on China with Juicy Label
Stocks/ETFs to watch: Liz Claiborne, Inc. (LIZ). Competitors: Benetton Group SpA (BNG), Jones Apparel Group Inc. (JNY), Polo Ralph Lauren Corp. (RL). ETFs: PowerShares Dynamic Consumer Discretionary (PEZ)

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Comments

[AndreaWasserman]

A benefit for Liz in focusing on the "power brands" that have their own stores, is that it will make the company less reliant on department store buying in the face of consolidation in that industry. More of Liz' overall business will be conducted direct-to-consumer. Further, if Liz blows out the number of retail stores for these brands, the company can continue to develop its relationship with the younger customer, who often prefers specialty store shopping.