Liz Claiborne Reaches Outside The Industry For New CEO

William L. McComb – a Johnson and Johnson group chairman, with no apparel manufacturing, or retail experience – will succeed Paul Charron as Liz Claiborne’s new chief executive officer next month.

In an earnings slump for the past year and a half and operating in a very tough retail environment, the multi-brand apparel giant’s new boss will be facing a very steep learning curve.

Trudy Sullivan, the Liz’s highly regarded president, was in the running for the job, but was passed over; leading to speculation that she will soon leave the company.

This year, four top executives have left the company and if Sullivan leaves, McComb will have to count on a weakened executive staff and Paul Charron, (who will consult for one year) to get him up to speed on the intricacies of global manufacturing, and apparel specialty retailing.

With a dearth of top executive talent available within the industry, look for more executives with a background in consumer product’s or corporate finance to ascend to the CEO spot at a number of major apparel companies in the coming year.

It took 16 months for Liz Claiborne to determine that no one at their company, or the entire wholesale/retail apparel industry for that matter, was more qualified to take over as their new chief executive officer then William L. McComb, an industry outsider, who most recently served as a Johnson & Johnson group chairman.

The shift in the retail apparel landscape, (with department stores and mass merchants consolidating and specialty retailers mushrooming) has created a set of unique challenges for the CEO’s of the large apparel manufacturers, who are expected to consistently increase earnings and shareholder value. The growing presence of private label brands on the sales floor along with the reality of fewer retailers to sell, has forced the top apparel executives to re-think their long-term strategies and operational platforms.

Aside from Liz, some of the companies most affected by the changing retail dynamics have been the Jones Apparel Group, Kellwood Co., Warnaco, PVH, Ralph Lauren, Perry Ellis International, VF Corp., Tommy Hilfiger and Hanesbrands. Many large privately owned apparel and footwear manufactures are also reeling from the changed retail climate.

In order to become less vulnerable to the often unrealistic demands of the giant retailers, many of manufactures have turned to direct-to-consumer selling through ecommerce, the development of their own specialty retail stores, strategic acquisitions and extending the global reach of their brands. The one company that seems to be doing it best these days is VF Corp., which has just registered their 12^th consecutive quarter of earnings gains. VF Corp. has successfully acquired unique independent brands such as The North Face and Vans and grew them quickly through superior merchandizing and new channels of distribution.

“Moderate” apparel brands owned by the multi-brand manufacturers are most vulnerable to becoming replaced by private label and prominent “better” brands such as Jones New York and Liz Claiborne now compete with highly promoted private label brands in the department store channel. The luxury segment, with its emphasis on design detail, appears to be the least vulnerable sector, which may account for the growing strength of companies such as Coach, Louis Vuitton and Hugo Boss. Contemporary brands such Juicy Couture, Theory, Guess and Free People, (which are unique and difficult to emulate) are also holding up well.

Liz Claiborne’s stellar record of growth over a 10 year period came to a screeching halt during the past six quarters and many of the company’s top executives have recently left the company. When the firm passed over its highly regarded president, Trudy Sullivan, in favor of Mr. McComb, it raised the question as to how soon it will take for her to assume a CEO position elsewhere. If she decides to leave, as expected, it will be left to Paul Charron (who will “consult” for one year) to teach Mr. McComb all about the unique complexities of running multi-brand multi-channel apparel company and how to generate earnings growth in an increasingly hostile retail environment. It should be very interesting.