NEW YORK — With a new chief executive officer, Liz Claiborne Inc. is beginning to re-examine its brand portfolio, and the first casualty has hit the floor — Mexx’s U.S. business.
The four domestic Mexx retail stores will close by July, and the company hopes to reallocate the real estate to other brands in Claiborne’s $4.85 billion portfolio.
“What we’ve done in the last few months is take a look at the entire portfolio of retail brands, and we have decided to focus on those businesses in which we have more potential for growth,” said Jill Granoff, group president for direct-to-consumer, and now Lucky Brand, C&C and Sigrid Olsen. “It’s really a question of choices and how we want to invest our time and money. Given that Mexx does not have the brand recognition here, we have decided we want to focus and prioritize on Juicy, Lucky, Kate [Spade] and Sigrid. We want to be sure we really leverage those proven winners.”
After seven of the 11 Mexx stores closed in early 2006, the remaining four stores — two in New York and two in Washington — have enjoyed double-digit growth and been profitable on aggregate, according to Granoff.
But the Mexx U.S. business makes up an “insignificant” portion of Mexx’s worldwide 1 billion euro, or $1.31 billion, a year business, and the change will not affect the European business, according to Claiborne.
Mexx, sold in 66 countries, failed to replicate in America its success in Europe, particularly in France, after Claiborne acquired the Dutch company in 2001. Granoff added this decision did not mean Mexx could not re-enter the U.S. market at a later date, when the company is more prepared to allocate advertising money to the brand.
The limited size of Mexx in the States mitigates the magnitude of the decision, according to analysts.
“When you look at Liz’s portfolio, there are a lot of brands they can grow,” said Brad Stephens, an analyst for Morgan Keegan & Co. Inc. “I don’t think the investment community was banking the future of Liz on the expansion of Mexx in the U.S.”
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In December, Claiborne’s new ceo, William L. McComb, had said he considered Mexx a success abroad and dismissed criticism that it had proved a failure closer to Claiborne headquarters. “Our emphasis has not been the U.S. market,” McComb said. “We have not launched Mexx here yet or turned on the marketing.”
McComb also declared at the time that he was not averse to shedding brands that did not make the cut. “A good strategy is to acquire and divest. Anyone worth their salt would say that,” he said. “Obviously, we don’t want to shrink our way to greatness, though.”
The Street is viewing this year as a transition year.
“It always comes down to resources,” said Margaret Mager, retail analyst and managing director for Goldman Sachs & Co. “Resources are scarce, from finances to management talent. There are only so many things that can be your top priority. This is more about prioritization than how Mexx is doing in particular.”
Mager added the decision confirmed that Mexx was not making gains in the U.S. — something analysts had long been saying — and that it had not done much more with the business than open a few stores. “The bottom line is the apparel business is very competitive, and it’s hard to get new concepts grounded, especially in specialty retail,” said Mager. “Forth & Towne just announced they are closing, and this is yet another one. The industry is coming up with new ideas on a regular basis and at same time abandoning ideas that don’t get traction within a short amount of time.”
Claiborne is still in discussions about what to do with the real estate, and declined to comment on cash charges involved in the change before the company’s earnings conference call Wednesday.
Although analysts suggested Claiborne might be wise to dump the approximate 9,000 square feet of selling space at 650 Fifth Avenue here, Granoff said she believed in the location and thought it would be a good flagship for one of the group’s other brands. The SoHo shop, at 500 Broadway, which opened less than two years ago, and the D.C. locales total about 2,800 square feet of selling space each — more in line with the Juicy and Lucky stores.