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Online Extra: Clothes and Consumer Goods: The "Same Stuff"


Paul Charron has been CEO of apparel retailer Liz Claiborne since 1994. During his tenure, he has overhauled the corporate backbone -- revamping computer ordering systems, completely redesigning warehouses -- and greatly expanded the company's offerings. Then he started an acquisition spree that today has him managing 35 brands, including upscale names like Dana Buchman, Ellen Tracy, and Sigrid Olsen, fashionable monikers like Enyce, Juicy Couture, and Laundry, as well as department-store favorites like Liz Claiborne (LIZ) and Monet. A growing retail business is headlined by European chain Mexx.

Following are edited excerpts from two interviews he gave BusinessWeek Senior Writer Nanette Byrnes in May and June.

Q: Managing 35 brands, each of which has four to six separate lines per year, plus fill-ins, sounds like a daunting task.

A: My life was a lot simpler back in 1994 when we had, like, four brands. We didn't have this very complex world of wholesale and retail and men's and women's, apparel and nonapparel, upstairs and downstairs.

On the one hand, it's a bitch to manage, but we've got an approach to managing it that enables us to navigate through the inherent complexity. In the world in which we live, one-size-fits-all doesn't work anymore. But treating parts of your business as if one size did fit all can give you an element of competitive advantage.

We manage 35 brands here, and I think we could manage 60 building on the capacities of all our people and on the systems, formal and informal.

Q: You started your career at Procter & Gamble (PG), which you've said heavily influenced your style of management, and then worked at General Foods, another company focused on brands. With so many brands in the company now, how do you make sure they don't cannibalize one another's business?

A: The most sacred act of the brand manger is the positioning of the brand that defines the target, the raison d'etre for the brand, the texture through which you communicate with your consumer -- the raison d'etre being the point of difference.

The texture of Liz Claiborne would be very different from the texture of Juicy Couture, which would be very different from the texture of Enyce. It isn't just the target consumer that's different -- one's harder-edged, one's soft and romantic, one's outrageous, one's soft and spring-like, one's all-American. Those textural things are really important, and brand mangers know this reflexively, whether it's Cheer or Dawn, whether it's Cool Whip or whether it's Liz Claiborne.

Q: But isn't apparel different? Because of its fashion focus, it's constantly changing, and designers are thought of as a creative breed apart.

A: The people who amaze me are the people who say, "Your experience [in consumer products] has no relevance to apparel." That's bulls--t. Of course I have relevance. It's the same stuff. The process of creativity [always] requires context and discipline.

Q: Somehow it's hard to imagine 7th Avenue fashion types adhering to strict business planning practices. How does that work?

A: It takes half the year to plan for the next year. We start from bottom up, then go top down. Then we get that together and [work through] the constructive tension between what the corporation needs and what the division wants to deliver. Then we make capital decisions on the basis of the strategic plan: How many stores are we going to open, which brands are we going to invest in, what can we afford to invest in over the next year that's going to generate returns in that time? And what will Wall Street demand?

[Early on,] I dictated probably a five-page document that said how to plan a brand business strategically, and this is how you fill in the forms. Then I sat with each division for, like, two hours, and we taught them how to do a strategic plan. On Thursday [May 6], I had a quarterly review for specialty retailing for two hours, then a series of quarterly reviews.

Q: Why do you do the reviews yourself?

A: This is a process of up-close-and personal dialog, not just with the president of each of the division but the whole management team. This process focused people in this industry on strategy, and it gives me as a CEO and my key corporate associates the opportunity to impact the business.

Q: How much has the business changed since you arrived?

A: When I came here in 1994, I was the only MBA in the corporation. I was perhaps the only Harvard MBA in the apparel business. But I've always viewed this as a consumer-products industry. My consumer product happens to be fashion, apparel, and accessories, and [it] changes every single season. It's not like Crest toothpaste. I'm changing every three weeks.

The season is 13 weeks, and I've got three or four lines in a 13 week period. The lady shopper comes in the department store every three weeks. That line on the aisle is going to be new -- I would say 25% of the product on the floor is new every three weeks, in every line.

Q: You've made a number of important acquisitions in the past few years. In most of them, the founders stayed on to continue overseeing the brand. Why?

A: I've always loved working with creative people. We didn't set out to buy just privately held companies. We didn't set out to buy just companies run by the founder. It just so happens we've done that a lot. [But] the last thing we want is for Gene Montesano [founder of Lucky Brand Dungarees] or Pam and Gela [founders of Juicy Couture] to take their money and run.

They come to us because they realize that without help they limit the potential of their beautiful idea. Pam and Gela were busting at the seams. They had this great idea. They knew what they were good at, and they knew what they weren't good at. They didn't want to spend their time making decisions about what corporate business system Juicy should use to get them from $40 million [in sales] to $100 million. Gene Montesano didn't want to worry about 401(k)s.

Q: How would you say you manage people?

A: [Wal-Mart (WMT) founder] Sam Walton talked about the servant leader. I'm not saying I personify that, but I've spent a career moving from industry to industry, place to place, and always been able to get people to teach me the key drivers of an industry. If I come across as a know-it-all or aloof, I'll never get people to teach me.

Q: You almost went into politics before a friend talked you into applying for an MBA program. How did Harvard change your path?

A: I became enraptured by marketing. One of the reasons I'm successful here is because I became the ultimate consumerist. Consumer behavior, why people buy -- it was the study of consumer behavior that fascinated me.

Q: Almost half of your sales increase last year came from 2002 and 2003 acquisitions. Does that put pressure on you to keep buying to keep that up?

A: Yes, it does. We can grow our base portfolio in the low single digits. That isn't going to get me a superior multiple. For 10% [sales growth] and 15% on the bottom [line], I have to do deals. Any deal that has been done in this industry in the past two years that we haven't done, you should assume we've looked at it.

It's now the middle of the year, and I haven't done a deal. We're hard at work at it. You have to stick to your principles, and I'm confident we have plenty of opportunity. We've stated that our interest in deals, in no particular order, is: international, men's, accessories, and specialty retail.


Later, Baby
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