C & C; California Inc. seemed like an unusual pick-up for a major apparel company like Liz Claiborne Inc.
The Los Angeles-based T-shirt maker was only two years old and generated a mere $21 million in 2004. But founders Claire Stansfield and Cheyann Benedict aimed for Claiborne anyway, and earlier this year the New York-based giant swooped up C & C; for $29 million, plus future payments.
"We decided that we wanted to create a lifestyle brand, and we wanted to sell," said Stansfield. "It really felt like it was the right fit."
It's turning out to be a right fit for Claiborne, too. C & C; brings what Claiborne's traditional department store clothing business lacks: Hollywood buzz, an entr & #233;e into higher-end boutiques and a burgeoning brand in the fast-growing fashionable contemporary apparel segment.
Combined with Southern California's strength in active apparel, Claiborne has been knocking on the door of other local apparel companies. The company's last three acquisitions C & C;, Juicy Couture Inc. and yoga and outdoor clothes maker Prana Apparel have all been based in the region.
"L.A. is young and vital and vibrant. It is way cool. It is sexy. It is celebrity. It is bling," said Paul Charron, Claiborne's chief executive. "We are definitely interested in ideas, concepts that come out of Los Angeles."
It's a stretch from many of Claiborne's 50 brands, including its namesake Liz Claiborne label, Crazy Horse, Dana Buchman and Axcess, which are largely geared to middle-aged and older women. But the numbers are looking good: While third-quarter net sales of the company's wholesale apparel totaled $885.7 million, down from $905.7 million for the like period a year earlier, locally based Juicy Couture and Lucky Brand Dungarees Inc. saw higher sales.
Margaret Mager, an analyst with Goldman Sachs Group Inc., said Claiborne's latest acquisition of Vista-based Prana also is intended to offset wholesale apparel weaknesses. "We view the impact of Prana as a cushion to declines in the department store channel and core Liz brand," she wrote in a research note.
Juicy Couture and Lucky Brand also help Claiborne's developing retail business, which posted net sales of $289.8 million in the third quarter, up from $261 million a year earlier. Claiborne operates about 100 Lucky Brand stores and will soon have 25 Juicy stores.
"What we have tried to do is to build a portfolio that serves consumers in different venues, in different geographies and in different ways," said Charron. "We have been most successful with Lucky and Juicy."
Beaver Theodosakis, co-founder of Prana Apparel, fielded six offers to buy his company, and at $34.4 million upfront, Claiborne's wasn't the biggest. But he settled on Claiborne in part because Charron had built a reputable track record with his prior California purchases.
"It was important to see that the founders of those brands are still involved and to know that they recognize cool brands," said Theodosakis.
Charron's goal isn't to dramatically change the companies Claiborne buys. Instead, he is looking for businesses with impressive management teams that can continue to run things.
At C & C;, Stansfield and Benedict said they have little professional contact with Claiborne's other brands and remain the creative force behind their clothes, which still are produced in the L.A. area. "We focus on those things that we do well, which is share information, source product, think strategically, build stores," said Charron.
Typically, Claiborne targets companies with at least $50 million in annual sales that show potential to increase those sales with added distribution. Paul Altman, vice president of Los Angeles-based Sage Group LLC, who has worked on three Claiborne deals, said the due diligence process is rigorous. "They assess the strength of the brand. They do their homework. They don't rush into decisions," he said.
It also helps if the brand's distribution is strong in areas untapped by Claiborne. Prana sells in about 1,600 outdoor specialty stores, including Eastern Mountain Sports Inc. "We are obviously extending ourselves in that way," said Charron.
For reprint and licensing requests for this article, CLICK HERE.
Stories You May Also Be Interested In
- Lucky, Juicy on the Block
- L.A. Specialty Shops Becoming Attractive Buyout Targets
- Liz Claiborne Acquires Los Feliz Designer C & C; California Inc.
- Denim Maker Blue Increases Retail Holdings
- Local Apparel Industry Cheers China Quotas
- True Religion Hires Goldman Sachs
- American Apparel Names New Chairman
- Economy in China on Upswing But Market Plays May Be Dicey