Liz Claiborne, Inc. is one of America's leading apparel companies. The founders led the company through spectacular growth in the 1980s, but business weathered the doldrums in the early 1990s following their retirement from active management. An aggressive revitalization plan helped put the sheen back on the Liz Claiborne name as it headed toward the new millennium.

Elisabeth "Liz" Claiborne was born in Brussels and raised in Europe and New Orleans. Her natural artistic flair led toward her goal of becoming a fashion designer. At age 20 she got her first break when she won a design contest sponsored by Harper's Bazaar magazine. Soon after that, she was employed as a sketcher and model in New York's garment district and worked her way through the ranks at several design firms. After serving for 16 years as the chief designer in Jonathan Logan's Youth Guild division, she realized that the working woman needed more wardrobe options. Unable to sell the concept of stylish, sporty, and affordable clothes for America's working woman to her employer, Claiborne left the company and joined her husband, Arthur Ortenberg, and another partner, Leonard Boxer, to found Liz Claiborne, Inc. in 1976. The three pooled $50,000 in savings and borrowed an additional $200,000 from friends and family to launch the company specializing in fashionable, functional, and affordable women's apparel. Shortly thereafter, Jerome Chazen joined the trio. The company showed a profit its first year and became the fastest-growing, most profitable U.S. apparel company in the 1980s.

Claiborne's timing was perfect; she began providing career clothes to women just as they started entering the work force in record numbers. As Jerome Chazen stated in Fortune, "We knew we wanted to clothe women in the work force. We saw a niche where no pure player existed. What we didn't know was how many customers were out there." Clothes designers had not fully exploited one of the largest growing groups in America--women baby-boomers penetrating the labor market. Liz Claiborne ignored the traditional industry seasons of spring and fall, opting instead for six selling periods, including pre-spring, spring I, spring II, summer, fall, and holiday, to provide consumers with new styles every two months. These short cycles allowed more frequent updates of new styles and put clothes on the racks in the appropriate season. By adding cycles, stores cut their inventory costs and overseas suppliers were able to operate more efficiently with the two extra cycles filling their slack periods. Liz Claiborne also made the decision not to field a traveling sales force. This determination, though disregarding conventional industry wisdom, stimulated the company's rapid growth. With virtually no overhead, Liz Claiborne was set for swift growth as sales skyrocketed.

During the 1980s Liz Claiborne evolved from a basic sportswear business to a multifaceted fashion house. By the early 1990s, it boasted 19 divisions and three licensees, whereas in 1980 it had just one division. The company went public in 1981 at $19 per share, raising $6.1 million. A petite sportswear division was introduced in 1981, and a dress division was added in 1982. A 1984 foray into girls' clothes failed by 1987. Four new divisions were launched in 1985, including Claiborne, the company's expansion into men's clothing. Liz Claiborne discovered that 70 percent of its women customers were also purchasing clothing for their husbands. Also created in 1985 was the accessories division, which was formerly a licensee. Some components of this line included leather handbags, small leather goods, and bodywear.

The company further expanded and introduced its signature scent in September 1986. The cosmetics division began as a joint venture with Avon Cosmetics Ltd., and in 1988 the company regained full rights to the line. (This division has since marketed a new fragrance, Realities, and the Claiborne fragrance for men. In the fall of 1993, the group introduced Vivid, its third women's fragrance.) The year 1988 also marked an important milestone for Liz Claiborne, Inc. After only ten years, the company was on Fortune's list of the top 500 industrial companies. It was one of only two companies started by a woman to achieve that distinction. Also, as an 11-year-old enterprise, it was one of the youngest companies ever to make the cut.

In 1989 the Dana Buchman division was launched. This division specialized in a line of higher-priced women's career clothes created for the bridge market. Its prices spanned the difference between moderately priced ready-to-wear sportswear and designer creations. In mid-1987, however, a slump hit the apparel business. Retail sales stalled in early 1988, inventories increased, and operating margins narrowed. In 1988, for the first time ever, Liz Claiborne's net earnings fell--by an estimated 11 percent, to $102 million. After years of 20 percent increases, sportswear sales increased only about three percent in 1988. Sales gains were getting hard to come by.

Searching for new avenues, Liz Claiborne focused on a long-overlooked group of consumers and introduced its Elisabeth division specializing in apparel for larger women. The line offered everything from career clothing and activewear to social occasion dressing. The line was very well received and gained market leadership. Sales rose 23.4 percent to $161 million in 1992. More importantly, in 1988 the company moved into the retail apparel business when it opened its first retail stores, offering the First Issue brand of casual women's sportswear. This break into apparel retailing was an expensive and highly risky proposition. Thirteen stores were launched that year and the company showed that it could be successful in this type of diversification. It operated 40 First Issue specialty stores throughout the United States and planned to add 16 more stores, mostly in 1993.

The company opened its first Liz Claiborne stores in 1989. These 18 stand-alone stores were placed in affluent suburban malls and served as laboratories for the company to test new designs and product presentations. They provided the company with immediate information regarding market trends through state-of-the-art bar coding and other electronic data interchange systems. Three Elisabeth stores were also opened serving the larger-sized consumer. Overall, sales of the retail division rose 20 percent to $92.9 million in 1992. In addition, the company operated 55 factory-outlet stores that marketed unsold inventory from past seasons. Sales achieved record levels in this area also, up 34.5 percent to $113.9 million. Liz Claiborne positioned these outlets at a distance from the stores where its products were customarily sold.

As profits and volume increased for Liz Claiborne, so did its influence at the manufacturing and retail ends of the business.

In addition to the company stores, Liz Claiborne dominated the selling floors of major department stores--sometimes more than half the allotment for women's apparel. The company did not own any factories, but made all of its merchandise through contracts with independent factories in 50 nations. The company reduced its reliance on Hong Kong, South Korea, and Taiwan in favor of countries like Malaysia, China, and Sri Lanka, where labor was less expensive. Less than ten percent of Liz Claiborne's products were made in the United States. There were drawbacks, though, to not owning the factories. To ensure that goods were produced to the high standards consumers expected, Liz Claiborne employed an overseas staff of almost 700 who regularly visited the factories.

At the retail end, Liz Claiborne commanded extensive clout. The company had a rigid noncancellation policy, meaning that if spring merchandise did not sell well in stores, retailers were still unable to cut summer orders. But Liz Claiborne generated what was known as strong "sell through." Its clothes were rarely marked down--only about five percent of its merchandise versus the industry norm of 15 percent. To reduce the risk of markdowns the company produced fewer goods than the level of demand forecast. Therefore, retailers got better profit margins and allowed Liz Claiborne more space on the floor. But because of limited space in department store floors, the company expanded abroad. In 1988 sales and marketing efforts began in Canada. In January 1991 Liz Claiborne, Inc. entered Great Britain, and later in the year it was introduced into Spain. Merchandise was also sold to stores in the United Kingdom, Ireland, and the Netherlands. Liz Claiborne tailored its strategies when marketing its products outside the United States. In some United Kingdom stores, the company leased space and sold the product itself. In Japan, it marketed through a mail-order catalog, and in Singapore Liz Claiborne granted a retail license for the operation of Liz Claiborne stores. This strategy seemed to work well as international sales totaled $108.1 million in 1992, while only six years earlier $1.4 million of sales came from outside the United States.

The greatest challenge to the company came in 1989, when Liz Claiborne and Arthur Ortenberg announced they would resign from active management in order to pursue philanthropic interests. They established the Liz Claiborne and Art Ortenberg Foundation, a private organization dedicated to protecting wildlife and the environment. This foundation also served the needs of the public through programs in the fields of human services, the environment, healthcare, the arts, and education.

The status quo continued after the founders' departure: Chazen, who had been with the company since the early days, was named chairman. A broad array of new products was introduced, including jewelry and sport shoes. Liz Claiborne further expanded its business to women's and men's optical frames, eyewear (fashion sunglasses and readers), and women's hosiery through licensing, and these revenues continued to climb. Tailored suits for the working woman debuted in 1991. This division was expected to generate sales of $100 million within five years. In May 1992 Liz Claiborne acquired three new labels from the bankrupt Russ Togs Inc. Crazy Horse casual wear was marketed in department and specialty stores. The Russ line offered updated career and casual apparel and was sold in moderate areas of department stores. The Villager line was offered in national and regional chain department stores and focused on career clothing and some casual wear. These and future acquisitions were expected to broaden the company's distribution and allow opportunities to expand clothing lines and create new products.

Although sales for 1992 increased 9.3 percent to a record $2.2 billion and the company's ten percent return on net sales remained one of the highest in the apparel industry, Liz Claiborne faced changing demographics. While the number of working women between the ages of 25 and 54 grew 43 percent in the 1980s, this would increase only about 25 percent during the 1990s. The company needed to become more visible in order to maintain market share. The combination of recession, increased competition in moderately priced sportswear, and the push into new markets led Liz Claiborne to seek a higher profile. In October 1991, the company launched its first print advertising campaign for apparel and accessories.

Liz Claiborne realized that cooperative advertising with retailers and its domination of department store floors was not enough anymore. Instead, the company needed to solidify its fashion image and create a global corporate image. Advertising was critical if the company was to preserve strong relationships with consumers and retailers. Also, Liz Claiborne could not expect to gain a foothold in Europe with an unadvertised fashion brand. Since floor space in Europe was much more limited, a company needed to advertise its image to get into the stores. Liz Claiborne did have an advantage in that the company stood for quality, value, and fit--exactly the standards of the Europeans and Japanese.

Liz Claiborne's $6 million advertising campaign broke in the November 1991 issues of 15 consumer publications, including HG, Vanity Fair, and Elle. The ad campaign was just part of Liz Claiborne's objective to increase visibility. In the fall of 1991, the company originated Women's Work, a philanthropic enterprise pairing women artists and writers with community groups in projects addressing domestic violence and work/family conflicts. For example, in Chicago, children's author Leah Komaiko collaborated with a group of city kids to write a book on working mothers. It was distributed through Reading Is Fundamental (RIF), schools, libraries, and reading programs.

Liz Claiborne was greatly concerned with listening to its customers. At the company's back-office operation in North Bergen, New Jersey, $10 million worth of IBM computers spit out information on sales trends throughout the country. This automated inventory network allowed quick response to market demand. In addition to this network, Liz Claiborne employed about 150 specialists to solicit feedback from customers at stores around the country and 21 consultants who made sure that clothes and displays were arranged in stores according to company diagrams. Ninety-five customer service telephone operators fielded questions from retailers.

The company that Liz built was noted for its well-organized management, distribution, and sales teams. In an industry where turmoil is a tradition, Liz Claiborne cultivated a strong team to run every aspect of the business. The company met industry challenges by following four guidelines it had instilled from its beginning: listen to consumers; create first-class products addressing their needs; price products with the consumer in mind; and always try to do more, and do it better. In 1992 Fortune once again named Liz Claiborne, Inc. as one of the ten most admired corporations in America.

With $2.2 billion in sales and products in over 10,000 stores, Liz Claiborne was the largest women's apparel manufacturer in the world. But the company's fortunes dramatically shifted in 1993. For the first time in the company's history, sales fell for the core Liz Claiborne Collection, Lizsport, and Lizwear lines. Net income fell 42 percent for the year. Some $300 million worth of merchandise went unsold. Business as usual was not working anymore. "That's too bad, because the old life was pretty good. In its heyday, Claiborne was regarded as the smartest, most efficient apparel outfit around," wrote Laura Zinn in a May 1994 Business Week article. "'When people were hired away from Claiborne, their new employers thought they were getting some magic,' says one ex-executive. Between 1985 and 1991, sales and net income almost quadrupled."

Critics said Liz Claiborne apparel had gone stale since the departure of the founder. Saks Fifth Avenue dropped the Claiborne core sportswear lines in 1993, and the new mass market lines (Crazy Horse, Russ, and Villager) remained unprofitable. The company depended on just four department stores (Dillards, May, Macy's, and Federated) for nearly half of its sales. Profits fell to $83 million in 1994 from a peak of $223 million in 1991.

Paul R. Charron, who moved from VF Corp. to Liz Claiborne in 1994 and was appointed CEO in 1995, led a restructuring drive: 500 of the company's 8,000 employees were laid of in 1995 and the unprofitable First Issue chain was closed. Charron then implemented a three-year program to cut expenses by $100 million, reduce excess inventory by 40 percent, and shorten production and delivery cycles by 25 percent. A major investment in technology helped the company improve clothing design and track sales more closely.

"Now Liz Claiborne is playing catch-up with a vengeance. The company, which has extremely deep pockets, and no debt, is marketing smartly cut silk suits and cocktail dresses as well as basic blue jeans and khaki pants," wrote Jill Jordan Sieder in a February 1996 U.S. News & World Report article. "'They're changing in all the right ways in a very tough environment,' explains Jennifer Black Groves, a retail analyst at Black & Co. 'A few years ago, I would have called their clothes basic, boring, heavy on the polyester. ... [Now] the word 'dowdy' just isn't fair anymore."' With its image for fashion flair on the mend, Liz Claiborne rolled out a $25 million advertising campaign in early 1996. Print ads, super models, television commercials, and outdoor advertising dovetailed with an updated in-store marketing program. Charron, who was named chairman in May 1996, had also relaunched product lines, sold off units to licensors, and added new products. Veteran merchandiser Denise V. Seegal came on board as president in October 1996. For the first time since 1992, Liz Claiborne's largest unit, women's sportswear, registered sales increases on the year: up 10.8 percent to $1.23 billion. Dana Buchman's sales were boosted 38.5 percent to $188.7 million thanks to help from the Dana B. and Karan lines introduced in February 1996.

The announcement of a strategic licensing agreement with Donna Karan International Inc. in December 1997 marked the first time Liz Claiborne acted as a licensee rather than a licensor. The 15-year exclusive contract, under which Donna Karan would receive a minimum of $152 million in royalties, gave Liz Claiborne the right to source, distribute, and market DKNY Jeans and DKNY Active trademarks in the Western Hemisphere. Aided by cost reduction measures, operational improvements, and strong sales in core product areas, net sales for 1997 climbed to $2.41 billion and net income reached $185 million.

The special markets division, formed in 1996 to encompass the moderate and value-priced brands, marked its first profitable quarter in 1998. The relaunched First Issue line was being sold exclusively in Sears, while the Crazy Horse label was offered by J.C. Penney. The division, which also housed Russ, Emma James, and Villager lines, benefited from Charron's experience with VF--the company moved from department store to a mass merchant focus during his tenure there. Liz Claiborne placed these popular priced products in Wal-Mart and Kmart and regional department stores such as Kohl's and Mervyn's. Special market sales were $104 million in 1997 and expected to increase by 30 percent in 1998. With its DKNY licensing agreement in place, the company was banking on a variety of brands, from mass to bridge, to drive future growth.

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