Liz Claiborne: The US Apparel Retailer's "Three-M's" Strategy

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Themes: Strategy
Pub Date : 2007
Countries : US
Industry : Women's Clothing

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Case Code : CSB0018
Case Length : 10 Pages
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Liz Claiborne: McComb's "Three-M's" Strategy Cont..

In 2005, the Federated Department Stores acquisition of May Department stores resulted in closure of almost 90 stores. As Liz Claiborne generates most of its business through department stores, the operating margins of the company declined in 2005.

In 2006, Liz Claiborne's revenues declined further than most of its competitors . In October 2006, William L. McComb (McComb), who worked as a chairman at Johnson & Johnson, succeeded Paul Charron as the CEO of the company

In the 1st quarter of 2007, Claiborne's net income declined to $16.2 million, or 16 cents per share, from $46.9 million, or 45 cents per share during the same period last year²⁵

McComb said, "This a big-picture conversation. There is a major change in channel dynamics. Neiman's doesn't want to carry what Bloomingdale's carries. Penny’s and Kohl's are in bitter battle. They all think they can press the vendor world for exclusives."²⁶ He further added that

"...retailers' demands for leaner inventory and faster fashion deliveries, have impacted Claiborne's business model with greater urgency and intensity than ever before, requiring a sea change in how we operate this wholesale business."²⁷ To overcome these problems, McComb initiated 'the three M's' strategy - Multi-brand, multi-channel and multi-geography - to offer apparel to its customers across a range of styles, price points and channels of distribution. However, analysts are sceptical about the success of McComb's strategies. Brad Stephens, an analyst for Morgan Keegan & Co. Inc., said, "Earnings growth has been nil for the last few years, and I just don't know how McComb goes about turning that around. The Liz brand makes up about 22 percent, and that 22 percent is not growing, which puts an awful lot of stress on the other 78 percent if growth is really the target."²⁸

25]D’Innocenzio Anne, "Liz Claiborne 1st-Quarter Profit Drops", http://biz.yahoo.com/ap/070501/earns_liz_claiborne.html?.v=4, May 1st 2007
26]Dodes Rachel, "Liz Claiborne's Unexpected Stumble", The Wall Street Journal, May 3rd 2007, page 29
27]"Liz Claiborne 1st-Quarter Profit Drops", op.cit.
28]Whitney Beckett, "TAKING A HARD LOOK AT LIZ: MCCOMB EVALUATES BRANDS FOCUSING ON 'REAL GROWTH' (Liz Claiborne Inc.'s William L. McComb) (Interview)",http://www.highbeam.com/doc/1G1-161039652.html, March 21st 2007