Financial thoughts

Liz Claiborne’s plan to sell its namesake sportswear only at J.C. Penney Co Inc stores and on a television shopping network highlights a new turn in the ongoing rivalry between the mid-tier department store chain and its slightly more upscale rival Macy’s Inc.

The decision Claiborne announced on Thursday to sell its Liz Claiborne and Claiborne brands exclusively at Penney ends a decades-long relationship between the brand, founded in 1976, and Macy’s. But Macy’s said it supported the decision, given the brand’s poor performance in recent years.

The move is good news for all involved, according to analysts and consultants. They said it guarantees revenue and profits for Liz Claiborne, gives Penney more exclusive product, and frees up Macy’s to better differentiate itself as its customer base increasingly overlaps with Penney’s.

“The Liz Claiborne brand has sold poorly in recent years and has continued to decline. As a result we could not justify expanding it at Macy’s,” said Macy’s spokesman Jim Sluzewski.

He said customers have been confused between the various brands carrying the Liz name, such as the Liz Claiborne line at Macy’s, the Liz Claiborne New York line at Bon-Ton Stores Inc and the Liz&Co brand at Penney.

“When customers see the same brand name available in different stores at different quality levels, they tend to be confused,” he said.

An industry executive, who declined to be identified by name, said the confusion would not be so damaging if consumers really saw Macy’s as more upscale no faxing payday loan.

“Their point is that it was damaging to their business to have Penney have it at a lower price. But then again, their argument is, ‘Our shopper doesn’t shop at Penney,’” the executive said. “If that’s the case, how does this get in the way?

“It shows that, in fact, Macy’s and Penney have more retailer-to-retailer interaction with consumers than Macy’s is normally willing to admit,” the executive added.

COMPETITION HEATS UP

Sluzewski said there was nothing new about consumers who shop at Macy’s also shopping at other stores. He stressed that what differentiates Macy’s is better product.

“Of course, consumers today shop in a wide range of stores,” Sluzewski said. “The merchandise in Macy’s is more fashion-oriented and of better quality than lower channels of distribution.”

He cited well-known brands available at Macy’s, including Ralph Lauren, Tommy Hilfiger, Calvin Klein and Kenneth Cole.

While Macy’s has traditionally been positioned as a little higher end than Penney, Kimberly Picciola, senior retail analyst at Morningstar, said the 2005 merger of Macy’s owner Federated Department Stores with May Department Stores broadened the company’s customer base by giving it stores in new markets.

“In those markets where they bought the May stores,” Picciola said, “they probably are competing a little more directly with J.C. Penney.” 

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