* Liz Claiborne and Claiborne brands exclusive to JCPenney
* QVC to sell Liz Claiborne New York brand by Mizrahi
* Sees Liz Claiborne wholesale brand profit in 2010
* Liz shares jump 31 pct; Penney shares up 0.7 pct
(Adds comments from CEO, analyst; Adds byline and dateline)
By Brad Dorfman and Martinne Geller
CHICAGO/NEW YORK, Oct 8 Liz Claiborne Inc
LIZ.N will move its namesake brand to JC Penney Co Inc
Department Stores and take a line by celebrity designer Isaac
Mizrahi off department store shelves in a strategy shift that
pushed shares up nearly 33 percent to their highest level in 11
The exclusive deal to sell all Claiborne brands at Penney
(JCP.N) will end a decades-long tie between the Claiborne
franchise and the Macy's Inc (M.N) store chain, but guarantees
revenue and frees up cash for the struggling apparel and
Citigroup analyst Kate McShane called the move "a giant
leap in the right direction for the flailing (wholesale)
segment," since it will reduce the company's exposure to the
volatile department store sector.
"They are out of that channel that was just eating them up
and spitting them out," said S&P equity analyst Marie Driscoll,
referring to higher-end department stores like Macy's that have
slashed inventory in the wake of the recession.
The Liz Claiborne brand has sold poorly in recent years and
continued to decline, said Macy's spokesman Jim Sluzewski,
adding that Macy's could not justify expanding it.
"Customers have been confused between various brands
carrying the Liz name, and the management of Liz Claiborne
needed to take corrective action," Sluzewski said in an email.
Liz Claiborne Chief Executive William McComb told Reuters
that the exclusive Liz&Co and Concepts by Claiborne brands it
already sells at Penney have been doing so well that it made
sense to "go all the way with them".
"At the end of the day, market forces draw you to the most
salient solutions for your business," McComb said.
The company's Liz Claiborne New York brand will now be sold
only on cable shopping network QVC. The company had hoped
Mizrahi's much-hyped revamp of the line earlier this year would
breathe new life into sales, but it failed to take off.
"It says the brand failed at retail because of the product
offering," Jeff Edelman, director of Retail Consumer Advisory
Services at RSM McGladrey Inc said of the Mizrahi line. "The
product didn't work."
McComb said timing was the problem.
"It was launched in the teeth of the great recession. The
force of the economy prevented retailers from betting big on
it." As a result, he said, consumers had a hard time finding
the new merchandise, even when they were looking for it.
"The whole point of QVC -- it's like an ironic snap to the
other direction," he said.
McComb said the Liz Claiborne New York brand could reach
$100 million in sales on QVC but noted the rest of the brands
have the potential to hit $1 billion in sales at Penney.
PAYMENTS AT PENNEY'S
The Claiborne and Liz Claiborne brands will be sold only at
J.C. Penney for up to 10 years, beginning with the fall 2010
lines. Liz Claiborne said it expects a profit from its namesake
wholesale brands in 2010.
Company brands Liz&Co and Concepts by Claiborne have been
sold since 2007 at Penney, which has fared better than some
rivals by emphasizing lower prices and more exclusive
In September, Liz Claiborne hired turnaround firm Alvarez &
Marsal to help it improve operations and cash flow. The company
said on Thursday that Alvarez had finished its review and made
recommendations, but it declined to give further details.
The Penney deal includes guaranteed minimum payments to Liz
Claiborne. That will make revenue and earnings more predictable
for Liz, which has suffered in the recession as retailers place
fewer orders for its clothes or sell them at steep discounts.
The company's working capital requirements will be lower,
since Penney will be responsible for sourcing and production,
said Chief Financial Officer Andrew Warren.
"This will help Liz further streamline," Driscoll said.
"What is their investment now? Their investment is the
intelligence. It's the designers."
The deal also alleviates conflicts between the Liz
Claiborne business at Penney and at other department stores in
the mall, McComb said. Other wholesale brands, such as DKNY
jeans, will still be sold at Macy's and Dillard's Inc (DDS.N)
Aside from its wholesale business, Liz Claiborne owns the
Juicy Couture, Lucky Brand, Kate Spade and Mexx retail chains.
The Liz Claiborne brand accounted for 17 percent of total
2008 sales, while other "Liz Family" brands made up 9 percent.
Under the QVC deal, Liz Claiborne will receive royalty
payments on net sales of the Mizrahi-designed line, which will
be more high-end. Mizrahi has a show scheduled to begin on the
cable network this fall.
Liz Claiborne shares closed up 31 percent at $6.81 on the
New York Stock Exchange, while Penney shares ended up 25 cents,
or 0.7 percent, at $35.16.
(Additional reporting by Aarthi Sivaraman in Seattle; Editing
by Michele Gershberg, Gerald E. McCormick and Bernard Orr)