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WIKI ANALYSIS
Liz Claiborne (NYSE:LIZ) is a multi-brand company that designs and markets women's, men's, and children's apparel, non-apparel items, fragrances, and jewelry. These products are sold through third-party specialty retail stores and department stores, in addition to the company's own 1387 retail stores.[1] The company’s primary brand was initially Liz Claiborne, but over time it has acquired and/or established over 45 brands, including Lucky Brand Jeans and Juicy Couture. LIZ's brands cover a range of styles: sportswear, activewear, casual apparel, fashion, and formal attire.
Like many other retailers, LIZ has struggled through the sluggish economy as consumers cut back on spending. Even two of LIZ's top brands, Juicy Couture and Lucky Brand, which fared well at the beginning of the economic uncertainty, have had declining revenues, indicating that the sluggish economy has affected all of the company's operations. The company's net sales fell by 24% in 2009.[2] In the long-term LIZ faces a fundamental challenge in its business model as department stores continue to increase their emphasis on private label merchandise instead of products from branded manufacturers such as LIZ.
Company Overview
LIZ designs and markets a variety of apparel and accessories through a portfolio of differentiated brands. LIZ uses third-party specialty retail stores, department stores and its own stores to get its products to consumers. LIZ's products are sold throughout the world, with most of its international business coming from Canada and Western Europe. LIZ operates 458 specialty retail stores and 363 outlet stores in the US and abroad, in addition to 566 concession stores in Europe.[1] The company generates 33% of its sales outside of the US.[3]
Business Segments[4]
LIZ's brands include a range of styles of apparel, accessories, jewelry, cosmetics and other personal products. The company divides its merchandise into the following segments:
- Domestic-Based Direct Brands (35% of sales): This segment includes brands sold in brand-specific, LIZ-owned retail stores in the United States, in addition to third-party specialty stores and department stores. This segment includes Juicy Couture, Kate Spade and Lucky Brand.
- International-Based Direct Brands (100% of sales): This segment is wholly composed of LIZ's MEXX brand, which offers fashionable apparel and accessories for men, women and children. MEXX is sold through LIZ-owned MEXX-branded specialty retail and outlet stores in Europe and Canada.
- Partnered Brands (40% of sales): This segment is made up of all of LIZ's brands that are sold in third-party specialty retail and department stores. Brands in this segment include Axcess, Claiborne, Concepts by Claiborne, Dana Buchman, Kensie, Liz & Co, Liz Calirbone, MAC & JAC, Marvella, MONET, TRIFARI, and multiple licensed DKNY brands.
Business Growth
FY 2009 (ended January 2, 2010)[2]
- Net sales fell 24% to $3 billion. Sales declined in all of the company's business segments due to reduced mall traffic and lower spending levels per purchase due to the sluggish economy.
- The company incurred a net loss of $305 million, an improvement over the net loss of $951 million in the previous year.
Trends and Forces
Can LIZ's Top U.S. Brands Stay Hot Through A Sluggish Economy?
LIZ had suffered from a sluggish economy just like many other retailers. During tough economic times, consumers cut back on discretionary spending, which includes the high priced name brand items that LIZ sells. Each of LIZ's brands targets young adults (primarily women) with fashionable apparel and accessories at higher prices (up to $160 for a single pair of Lucky Brand jeans)[5]. When money is tight, consumers are looking for getting the most out of their money, rather than spending a large amount for a name. As a result, LIZ has suffered through the economic down turn as net sales fell by 24% in 2009.[2][6]
Department Stores Turning to Private Labels
Department stores are increasingly seeking to distinguish themselves by offering exclusive brands and private label brands. Exclusive brands are brands marketed under the wholesaler's name that are sold only in a particular chain. Private label brands are produced by third-party manufacturers but sold under the brand name of the retailer. Not only do exclusive and private label brands differentiate retailers, they offer higher profit margins for retailers than comparable merchandise from branded manufacturers. Due to these advantages, many department stores have been increasing their investment in exclusive and private labels and, in turn, these brands have been taking shelf space away from branded manufacturers like Liz Claiborne. This trend poses a threat to LIZ's business model and LIZ may have to shift more of its attention to its own specialty stores in order to make up losses in shelf space in department stores.
Competition
As a firm that operates a portfolio of brands in the apparel and accessories space, LIZ faces direct competition from comparable holding companies such as Jones Apparel Group (JNY) and Phillips-Van Heusen (PVH). Jones Apparel Group owns brands such as Anne Klein, Nine West, Easy Spirit and Jones New York. Phillips-Van Heusen holds brands such as Calvin Klein, IZOD, Van Heusen and Kenneth Cole. In addition to these holding companies, each of LIZ's brands face competition from a variety of sources. Many of LIZ's brands face competition from other department store mainstays such as Polo Ralph Lauren (RL) and department store-owned private labels.
References
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