Fordham Law

Diane von Furstenberg, Liz Claiborne: designer greats, different fates

Susan Scafidi in Crains New York, November 27, 2011

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The Liz Claiborne label is being sold off to J.C. Penney while the Diane von Furstenberg brand makes fresh inroads.

Last summer, New York's elite gathered at the New York Public Library for an elegant black-tie event to honor fashion designer Diane von Furstenberg, who was being awarded the Municipal Arts Society's prestigious Jacqueline Kennedy Onassis Medal. Ms. von Furstenberg, credited with rejuvenating the meatpacking district into a fashion destination, regaled the crowd with tales of her relationship with Mrs. Onassis, while stressing the importance of the fashion industry in New York.

“She was a really inspiring honoree,” said MAS President Vin Cipolla. “Diane has absolutely helped keep New York at the forefront as a fashion leader and has been a neighborhood catalyst as well.”

As Ms. von Furstenberg was receiving her award, the fashion brand of another powerful and charismatic visionary, Liz Claiborne, was being sold off to value department store J.C. Penney. Once upon a time, it was the biggest women's fashion label in the world and the lead division in multibillion dollar conglomerate Liz Claiborne Inc., where it raked in some $2.2 billion in sales. It sold to Penney last month for less than $270 million.

“To go from [being] the largest iconic fashion brand in the country and the world, to being a proprietary brand at a large retailer is an uncommon journey,” said Marshal Cohen, chief industry analyst at market research firm NPD Group Inc.

The divergent fate of the two brands is, at its heart, a cautionary tale for any company whose success is intimately connected to an iconic leader. In both cases, Ms. von Furstenberg and Ms. Claiborne were indivisible from the brands they created, and both left their companies. But in only one case did the founder reclaim her brand to drive it to fresh heights and become the toast of high society.

Ms. von Furstenberg and Ms. Claiborne, who passed away in 2007, won the hearts of American working women when they founded their apparel companies in 1972 and 1976, respectively. Riding the wave of the nascent women's movement, both Brussels-born designers recognized the market's need for clothing that was versatile, professional, chic and wearable at a time when women were making the most of their newly claimed equal rights and entering the workforce in droves. And both women rose to prominence, the styles of each epitomizing an entire class of women.

“In the case of both brands, women really identified, in different ways, with their namesakes,” said Susan Scafidi, academic director of the Fashion Law Institute at Fordham Law School. “Diane was the princess, the social butterfly, the icon. Liz was someone you could sit down with and have coffee.”

That connection with shoppers was what made DVF and broke Liz, retail experts said. Liz's founder retired, leaving the label in a free fall, while DVF's returned to reinvigorate the brand into a continual upswing. Fashion companies need figureheads, or at least designers with style. Other labels have also lost their chiefs, but new designers came in to bolster the business—as has occurred with Karl Lagerfeld at Chanel, and, more recently, with Sarah Burton at Alexander McQueen. Whereas Ms. von Furstenberg is still very much involved in her company, the absence of Ms. Claiborne has taken its toll.
Rapid expansion

After starting her label 35 years ago, Ms. Claiborne quickly expanded the company, taking it public in 1981 and making the Fortune 500 four years later. But in 1989, at the age of 60, she left the firm. In the subsequent decade, then chief executive Paul Charron expanded it to a 40-brand stable, purchasing apparel companies such as Juicy Couture and Dana Buchman, before leaving in 2006. Liz Claiborne Inc.'s namesake label simply coasted along.

In a short time, however, Liz lost its footing as it was forced to contend with rising competition. Its signature polyester, elastic-waist pants and other dated styles filled department stores. A brand whose core consumer was getting older, Liz faced a unique hurdle. It needed to be contemporary enough to attract new customers, without alienating older, loyal shoppers. Analysts say the brand failed to change, and, moreover, padded the selling floor with sportswear and other lines.

“They should have adapted the product to the current market, rather than what the customer used to be,” said Jeffrey Edelman, director of retail and consumer advisory services at RSM McGladrey.

Liz also relied too much on department stores, a struggling sector, instead of focusing on stand-alone shops. As a result of consolidation and the rise in specialty stores, U.S. sales at department stores last year were down 25% from five years prior, according to the U.S. Department of Commerce.

The DVF brand underwent a similar decline in popularity when Ms. von Furstenberg left the U.S. for Paris in the 1980s, abandoning her label to licenses. But in the next decade, younger generations began to rediscover the vintage appeal of the classic wrap dress. Noticing this, Ms. von Furstenberg returned and redesigned the dress into a stylish and more modern version. By 1997, she was catapulting the brand into worldwide success.

“Without someone at the helm, there's no vision,” said Sharon Graubard, senior vice president of trend analysis at fashion trend firm Stylesight. “[Diane's] name might have been there, but there was no oomph behind it. Once she came back, the clothes resonated with new consumers.”
Celebrity fashion appeal

Today, DVF boasts $200 million in annual revenue and 44 worldwide boutiques, a quarter of which have opened in the last two years. Ms. von Furstenberg recently expanded the company to include a fragrance and a home furnishings line.

“I realized how much power the wrap dress still had,” she said, noting that “the principles behind that dress—to be independent, to be feminine, to be empowered—that is still the foundation of the brand.”

Ms. von Furstenberg has also thrown her celebrity fashion appeal behind projects that have little to do with clothing: revitalizing the newly fashionable meatpacking district and ensuring the construction of the High Line park, of which she and husband, media mogul Barry Diller, were early backers.

She was also instrumental in moving Mercedes Benz-Fashion Week uptown to the illustrious Lincoln Center, and helped to spearhead the city's shopping event Fashion's Night Out, now in its third year. Such high-profile ventures only strengthened the public's awareness of the DVF brand.

For Liz, the company's efforts at revival were too little, too late. Three years ago, Liz Claiborne Inc., under the helm of current CEO William McComb, brought on designer Isaac Mizrahi. Sales for the Partnered Brands segment of the company, which included Liz, had fallen by more than 27% in 2008, to $1.6 billion. But shoppers rejected the designer's boisterous colors and large prints. Mr. McComb turned his attention to the company's other brands, such as Lucky Brand Jeans, Kate Spade and Juicy Couture.

Eventually, Liz's future grew bleak enough for Mr. McComb to pull the plug—he sold the brand to Penney in October, cementing a deal that began in August 2010 when Penney became the exclusive licensee of Liz. It allows Liz Claiborne Inc., which will be changing its name, to decrease existing debt. Earlier this year, the company had a debt load of nearly $770 million—the recent deal more than halved that figure.

Executives at the Plano, Texas-based Penney declined to comment on their plans for the label, which maintains the same design team it had underneath Liz Claiborne Inc.

Mr. McComb said that Penney will attract younger shoppers to Liz, thus giving the brand a second life. “J.C. Penney has both a winning strategy and a consumer base that appreciates all the Liz Claiborne brand has to offer, including its strong heritage and identity,” he said.

A version of this article appeared in the November 28, 2011 print issue of Crain's New York Business.