Liz Claiborne's Identity Crisis in 2012

Consumer brands company Liz Claiborne (NYSE: LIZ  ) no longer even owns the Liz Claiborne brand; that's why it's changing its name to the cryptic Fifth & Pacific Cos. Investors beware: This consumer goods company doesn't even know who it is as we enter 2012.

Liz Claiborne shares plunged yesterday when the company cut its 2012 profit outlook and announced that its chief financial officer, Andrew Warren, will depart in March. Liz Claiborne (soon to be known as Fifth & Pacific) recently made a gamble, selling off brands like Liz Claiborne and Monet to J.C. Penney to focus on its higher-end, more youthful brands Lucky, Juicy Couture, and Kate Spade.

Investors applauded Liz Claiborne's decision to sell off the namesake and other underperforming brands, and in many cases, sharpening focus on stronger brands can be a logical move. However, Liz Claiborne's been a wreck for a while now, and just because it's devised a logical strategy doesn't mean it will be able to execute.

This company's suffered an identity crisis for years. In 2006, William McComb took over as chief executive officer; there was good reason for skepticism, since he wasn't an apparel merchant and came on board from Johnson & Johnson. A glance at Liz Claiborne's long-term chart doesn't give an impression of exemplary performance since he took the reins. In fact, Liz Claiborne hasn't reported an annual increase in sales since the year ended January 2005.

This reminds me a bit of Talbots (NYSE: TLB  ) , whose long-standing chief executive officer Trudy Sullivan failed to turn the company around. Late last year, Talbots finally announced Sullivan's (expensive) departure.

Before its decision to shed the namesake brand, Liz Claiborne had another thing in common with Talbots: aiming for the female baby boomer demographic. That demographic group has been notoriously ill-served by retailers and has been financially strapped in the aftermath of the financial crisis to boot; Coldwater Creek (Nasdaq: CWTR  ) and Chico's (NYSE: CHS  ) have their share of struggles these days, too. Coldwater Creek isn't profitable, and Chico's sales have dwindled from their peak in the fiscal year ended August 2008.

Liz Claiborne's looking for a rebirth with a new name in 2012, so shedding the boomer-oriented brands is a logical move. However, whether this company's named Liz Claiborne or Fifth & Pacific, it still faces the same brutal competitive landscape that's making life hard for many retailers and consumer goods companies. Investors should avoid this dicey bet. I'm making a CAPScall as soon as this article publishes, and you'll be able to track my progress here.

Add Liz Claiborne to your Watchlist to watch its developments in 2012. If you're in the mood to shop around for a retail stock idea from beyond our borders, check out this free report: "The Motley Fool's Top Stock for 2012."

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (3) | Recommend This Article (6)

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  • Report this Comment On January 11, 2012, at 6:38 PM, wmtworker wrote:

    Someone on cnbc today predicted liz to double this year.

    I didn't catch any of the details though.

  • Report this Comment On January 12, 2012, at 2:08 PM, jarandel wrote:

    Your article is marred by factual errors and fails to paint an accurate picture of Liz Claiborne Inc.’s (soon to be Fifth & Pacific Companies) performance, strategic direction and growth potential.

    First, the identity and direction of our company couldn’t be clearer: we are a direct-to-consumer company focused on growing our intrinsically American brands – Juicy Couture, kate spade, Jack Spade, and Lucky Brand -- both domestically and internationally. In addition, we are a more capital efficient company with brands that have tremendous global appeal and growth potential.

    Second, as we stated in our Q3 earnings call in November, kate spade posted direct-to-consumer comp sales growth of 74% for the first 10 months of 2011. After going through a creative reinvigoration in 2011, Lucky Brand saw nine consecutive months of direct-to-consumer growth and our goal is for it to surpass more than $1 billion in retail sales. And Juicy Couture, our brand with arguably the greatest global awareness and potential for international growth, is launching its new product line this month – the first from Creative Director LeAnn Nealz.

    Third, while it is true we are in a competitive industry, we are confident that our more focused core portfolio of brands and more capital efficient structure will allow us to successfully compete. (It may be worth noting that since we announced the sale of our Liz Claiborne brand our stock price has nearly doubled.)

    Jane Randel, SVP Corporate Communications

    Liz Claiborne Inc.

  • Report this Comment On January 13, 2012, at 1:41 AM, justaskme wrote:

    Hi Jane,

    Glad you are here to discuss.

    I find it unusual that LIZ / FNP cut budget brands now aiming for the higher end market and there seems to be a complete lack of understanding of how "Luxury Goods" trickle down in fashion as you mention executive strategy is now “direct to consumer.”

    End customers look to see brands that "hang" on the rack together in flagship Majors and innovative boutiques that set trend. They also are swayed when PR groups can get product on celebrities (which is how Juicy, Kate Spade, and Lucky started.) When you cut those elements out of the equation and disappear off those important racks, the products struggle to fetch a premium price or high-end appeal in general. The regular American mall shopper is o.k. with the average brand and that is indeed a large market. However, at the end of the day you will eventually board the same boat as Gap or Banana Republic who offer low prices, fair product for fair quality, and typically on sale driving prices even lower to compete as the brand carries no Luxury in the mind of the consumer. Basically, you will no longer fetch a premium price or be considered luxury.

    I am in the Denim business so the only brand I can speak about with knowledge is Lucky. This is a HIGHLY competitive space mastered by long time veterans and individuals truly passionate about the product. The Executive team and even upper management at Lucky are strong in retailing but have no individuals on board recognizable from the “premium denim” space to direct the branding, marketing, or sales strategy. The product quality and authenticity is another topic if I had more time. It’s no wonder Lucky is not in the finer boutiques anymore or luxury retailers and that is a HUGE shame and total miss. It eventually dilutes the value of the brand itself and you have seen it (no offense but 9 months of increase after years of loss is not enough compared to the fact that Lucky missed the denim boom and let the space be taken over by an ocean of competitors when you could have literally dominated the industry with LIZ backing.)

    Lucky has the cleverest name in Denim and the brand positioning is limitless if you get some help on board from known “premium denim” veterans with mixed experience in both buying and wholesale in this specific market with actual hands on experience. However, my fear is that its one step away from becoming the Gap and entering the price wars never mind recapturing luxury branding appeal.

    Hope you guys turn things around and bring some of the right people to the team!

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