NEW YORK — The Paul Charron era at Liz Claiborne Inc. is drawing to a close.
Charron, who turned Liz Claiborne from a better-priced sportswear firm into one of the biggest apparel conglomerates in the world, said Tuesday that he will retire as chairman and chief executive officer at the end of this year.
Charron, credited with being a strategic thinker and the driving force in the transformation of Claiborne into a $4.6 billion multibrand, multicategory and multichannel business, will step down when his contract expires on Dec. 31. A search is under way for a successor and Claiborne promoted executive vice president Trudy Sullivan to president. The board has retained executive search firm Spencer Stuart to assist in the process, and will consider internal and external candidates.
“I’ve been in this chair for 11 years, and I thought it was the appropriate time to go,” Charron, 63, said in an interview. “But I am appropriately young and not on my way to the old folks home. I am here and not going anywhere for the next 12 months. I will continue to drive this company and lead it into 2007 with enhanced shareholder value.”
Sullivan, 56, who reports to Charron, will have expanded global responsibility for the business lines and myriad brands in the company’s portfolio. She reports to Charron. Sullivan joined Claiborne in 2001 as group president of Liz Claiborne Casual, Collection and Liz Claiborne Woman. In 2002, she was named an executive vice president and assumed additional responsibility for accessories, cosmetics, retail, outlet and licensing, and since 2005 has had oversight responsibility for all of the company’s brands.
In a statement, Sullivan said, “I am extremely pleased to be taking on the role of president at this important juncture in the company’s development. During my tenure, I have been privileged to help grow our business into one of the most diverse and well balanced portfolios in the industry with products sold around the world in every major retail channel.”
Charron has served as ceo since 1995 and became chairman in 1996. He has grown the company from a $2 billion firm spanning five brands to a company with a portfolio of 41 brands serving a variety of markets.
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Spencer Stuart and the board are working to have a successor in place before the end of the year, Charron said.
“It’s most important that we find someone right for the job,” he said. “We need someone who can lead this company into the next phase. That’s more important than filling the position immediately.”
There was speculation last year that Charron was thinking about retiring at the end of 2006 and that a search was already under way for a replacement. Charron continually denied the rumors.
Asked about retirement during a conference call when the firm reported quarterly results at the end of July, Charron said: “Absolutely not. I’m way too young to retire. I’m committed to serving as chairman and [ceo] at least until the end of 2006. Nobody should read anything into this date other than that’s the expiration date of my current contract.”
Many experts believe there are a select few executives in the fashion industry who could be considered as a possible replacement for Charron. Before joining the company, Charron’s background was in consumer products and he injected that culture into the apparel group, launching the drive for acquisitions, promoting extensive consumer research and seeking to make Claiborne more responsive than many other fashion companies.
Given that, some observers said it is likely Claiborne would look outside the industry to recruit its next ceo in the same way that Gap Inc. did with Paul Pressler, formerly of Disney, and Gucci Group did with Robert Polet, who worked at Unilever.
Although many of the candidates come with caveats, those mentioned as possibilities include Roger Farah, chief operating officer of Polo Ralph Lauren; Steve Sadove, the new ceo of Saks Inc.; Rose Marie Bravo, ceo of Burberry, who is exiting in July; Hal Kahn, former chairman and ceo of Macy’s East; Mindy Grossman, vice president of global apparel at Nike; Janet Grove, chairman and ceo of Federated Merchandising Group and vice chairman of Federated Department Stores, and Joseph Gromek, president and ceo of the Warnaco Group.
Of this group, the experts said Farah, with his major department store, athletic chain store and women’s and men’s wholesaling experience, was a proven leader. Sadove, former vice chairman of Bristol Myers-Squibb, who led Clairol to become the number-one hair care business in the U.S., also is viewed as a strong executive and brand builder. Bravo’s success at Burberry could make her a prime candidate, Kahn is a strong merchant and Grossman has wide-ranging wholesaling experience at Polo Jeans, Warnaco and now Nike, executives said. Grove excels in product development and merchandising, and Gromek is racking up a good track record at Warnaco.
The announcement of Charron’s retirement came after the close of trading on the New York Stock Exchange. Claiborne shares were up 1 percent on Tuesday, closing at $34.41.
The company has not been without its challenges. It has a cautious outlook for the year because of higher costs and a slowing economy. In 2004, Lord & Taylor dropped the better-priced sportswear Liz Claiborne brand, and Charron has said that growth of the Liz Claiborne brand has slowed. But, he added, that does not mean it isn’t still dynamic.
“Liz Claiborne is the most fully developed of our power brands,” he told shareholders in May. “Products sold under the Liz Claiborne name have retail sales in excess of $2.3 billion — this is what we define as brand reach — and are available in 19 product classifications ranging from sportswear and swimwear to flooring and luggage and everything in between. Liz Claiborne is sold in 34 countries around the world including an exciting relaunch in Europe.”
Rivals and other industry executives praised Charron’s stewardship.
Peter Boneparth, ceo of Jones Apparel Group, one of Claiborne’s biggest competitors, said Tuesday, “I have always had a great deal of respect and admiration for Paul and what he’s accomplished. We share a very similar view about what is required to be successful in this industry and I wish him all the best. The course he chose to take, I believe, with Liz Claiborne was clearly the right one for that company. He certainly served his shareholders and the associates of Liz Claiborne very well.”
Andrew Jassin, managing director of the Jassin-O’Rourke Group, a fashion consultancy, said Charron has been “a larger-than-life spokesperson for the industry, making it really an industry, rather than a garment center.”
“Paul has been instrumental in changing the focus of our industry, both at the federal government level through his people who work for him on legislation that affected the industry, as well as working within the financial communities, allowing them to peer into an industry that was really very much seat-of-the-pants,” Jassin said.
He was referring to executives such as Bob Zane, senior vice president of Claiborne, who is chairman of the U.S. Association of Importers of Textiles & Apparel.
Gilbert Harrison, chairman of Financo, speaking Tuesday night during a dinner at the Fashion Institute of Technology, said, “Paul has done a phenomenal job. His marketing background has taken Liz to a higher stage. His shoes will be difficult to fill.”
And Jane Elfers, ceo at Lord & Taylor, said, “Paul has done a tremendous job for someone who was basically an outsider to the industry. His acquisition strategy has put Liz Claiborne in a great position going forward. He’s such a great leader and such a great motivator.”
For the three months ended Oct. 1, the apparel giant posted a 1.7 percent rise in net income to $113.5 million, or $1.06 a diluted share, from $111.6 million, or $1.03, in the same year-ago quarter. Wall Street had expected the firm to deliver earnings per share of $1.09.
Sales in the quarter rose 2.3 percent to $1.34 billion from $1.31 billion. By segment, wholesale apparel sales were $837.3 million, representing 62.6 percent of total revenues. Wholesale nonapparel sales were $198.5 million, or 14.9 percent. Retail sales were $289.8 million, or 21.7 percent of total revenues, with comparable-store sales up 6.6 percent. Lucky Brand same-store sales rose 18.1 percent. The balance of the revenue base was from licensing income.
For the nine months, net income was up 3.5 percent to $239.1 million, or $2.20 a diluted share, from $230.9 million, or $2.10, last year while sales increased 6.2 percent to $3.65 billion from $3.44 billion. In July, Charron cited a “depressing litany of factors” that is creating a challenging environment, but also cited the company’s continuous interest in acquiring new brands. This includes higher transportation and energy costs, the economic impact of the fall hurricane season, rising interest rates and concerns over increasing inflation.
As a result, the company cut its initial forecast, citing a weakened economy that has made estimating future results more difficult. For fiscal year 2005, the company forecast earnings in the range of $2.90 to $2.94 a share, which compares with a prior estimate of $2.98 to $3.04. Sales projections were also reduced to a 4.5 percent gain, which compares with initial guidance of an increase of 6 to 7.5 percent. Liz’s fourth-quarter EPS estimate is pegged between 70 cents and 74 cents on flat sales.
At the company’s annual meeting last May, Charron said, “It is not just the number of brands in our portfolio that separates us from our competitors, it is their quality. Some are small, others are more fully developed. But each is distinguished by a unique brand position appealing to clearly understood consumer tastes and attitudes.”
Charron joined Claiborne in 1994 as vice chairman, chief operating officer and a director. In 1995, he was promoted to president, and later that year, to ceo, succeeding longtime ceo Jerome Chazen. In 1996, he also became chairman when Chazen retired. Prior to joining the company, he had served since 1988 in senior executive capacities, including group vice president and executive vice president at VF Corp. Before that, he was an executive at Procter & Gamble, an experience he has often cited as vital to the success he has had at Claiborne.
A Harvard MBA, Charron’s list of acquisitions include Juicy Couture, Ellen Tracy, Lucky Brand Jeans, C&C California, Enyce and Mexx, taking a predominantly wholesale business and turning it into both a wholesaler and a retailer. He has developed lower-priced lines for mass merchandisers and the company’s distribution now encompasses upscale and mainstream department stores, owned and operated specialty stores, independent specialty stores, e-commerce, mass merchandisers and factory outlets.
Charron is a director of Campbell Soup Co. and serves on a number of not-for-profit boards, including the National Retail Federation, the American Apparel & Footwear Association, Vital Voices Global Partnership and the Partnership for New York City.
As for his retirement, Charron said he has yet to make any solid plans. For now, his focus is still on Claiborne.
“That is truly what I am proudest of at this company, the evolution,” Charron said in a phone interview. “We have a very high-quality brand portfolio, and for the shareholders, and as a shareholder myself, I will ensure that the future of Liz Claiborne is bright.”
The Charron Years:
1994
- Paul Charron leaves VF Corp., joining Liz Claiborne Inc. as vice chairman, chief operating officer and a director.
- The company consolidates three of its moderate-priced brands — Russ, Villager and Crazy Horse — into one unit. “We want to refine these labels and position them as part of a portfolio,” Charron said. “This is not rocket science. This is simple, straightforward business.” Claiborne would come to be defined by its portfolio of brands acquired and developed during Charron’s tenure.
1995
- Charron is named chief executive officer, succeeding Jerome Chazen.
1996
- Charron ascends to chairman, succeeding Chazen.
1999
- Claiborne acquires a majority interest in Lucky Brand.
- Sigrid Olsen joins the fold when Claiborne acquires a majority interest in Segrets Inc.
2001
- Claiborne acquires Mexx Group, a Dutch company with wholesale and retail operations. Mexx ultimately become the base used to introduce some of the company’s other brands to the European market.
2003
- Juicy Couture is acquired and quickly expanded into other product lines, such as accessories.
- Claiborne goes urban with the acquisition of Enyce.
2005
- T-shirt brand C&C California Inc. joins the portfolio.
- Climbing and yoga gear manufacturer Prana is acquired.
2006
- Charron announces he will retire at the end of the year.
— With contributions from Marc Karimzadeh and Evan Clark, Washington