Bill McComb has played the role of Edward Scissorhands as CEO at cash-strapped Liz Claiborne Inc., slashing from its corporate collection labels Mexx, Dana Buchman and now its flagship Liz Claiborne for $328 million. (WireImage)
Lucky Kate? Juicy Luck? Lucky Juice?
Liz Claiborne — the tattered clothing company that owns Juicy Couture, Kate Spade and Lucky Brand — is searching for a new name after selling its once-dominant namesake department-store label to J.C. Penney for $267.5 million.
CEO Bill McComb — who, according to sources, has lately been prodded by investors to shed assets and slash debt — insisted yesterday that selling Liz will result in “a more efficient, dynamic, brand-centric, retail-based company.”
The sale of Liz — which at its peak in the 1990s was a nearly $2 billion business –caps a closet-cleaning this year that has generated upwards of $470 million through the disposal of brands including Mexx and Dana Buchman, which was acquired by Kohl’s.
The cash will be used to pay down more than half of the company’s debt.
Liz shares yesterday surged as much as 42 percent before giving up some of the huge gain to close at $6.84, up 34 percent.
Penney’s CEO Myron Ullman — who is handing the reins of the department-store giant to former Apple exec Ron Johnson — has portrayed an August 2010 licensing agreement for the Liz brand “like he was doing a favor for Bill McComb,” according to one industry insider.
Indeed, an option in that multiyear agreement for Penney’s to acquire the Liz brand in five years was accelerated under yesterday’s deal because McComb was looking to “get his cash sooner rather than later,” the source added.
While slashing debt will ease liquidity concerns, the most likely outcome is that McComb, who lacks resources for an aggressive revamp, “will continue to muddle along,” according to an investment banker close to the company.
Although the smaller Lucky Brand and Kate Spade labels have lately shown improvement, Juicy Couture is struggling, with comparable sales down 5 percent last month amid continued complaints of boring fashions.
Critics charge that the fate of Liz — whose legendary founder began dressing women for work in the late 1970s — is the latest example of a once-vibrant label that has withered under McComb.
A former marketing executive at Johnson & Johnson, McComb had no experience in the apparel business before taking the helm in 2006.
“From the very beginning, Bill had no respect for the Liz brand,” according to a former company executive. “He thought it wasn’t cool enough anymore, and didn’t seem to believe it could be resuscitated.”
Despite this, McComb made the decision to attempt a costly turnaround, hiring celebrity designer Isaac Mizrahi in 2008 and paying him a whopping $6 million salary.
“After he hired Isaac, McComb liked to say that the success of the company depended on the success of the Liz brand,” according to another former employee. “It looks like he was right about that.”
Liz under McComb’s leadership has lost money every quarter for the past four years, with its business now less than half its peak size.
Liz said it aims to find a new name within 12 months.