MENNEALY
Kathy Willens  /  AP file
Anne Mennealy, of Los Angeles, searches for a cashmere sweater  at Bloomingdale's in New York.
By Garrett Glaser Correspondent
CNBC
updated 3/15/2004 3:05:40 PM ET 2004-03-15T20:05:40

It’s a rivalry but not a crazy one.  That's the gist of what we learned from analysts who know the two huge clothing retailers Jones Apparel Group and Liz Claiborne.  Each firm has a different growth strategy: Jones buys huge companies, Liz Claiborne buys smaller ones.  Jones keeps costs down more, Liz Claiborne delivers on earnings with more stability.  They watch each other like hawks but so far, it's a rivalry that hasn't grown nasty.

On the surface, Jones and Liz Claiborne seem a lot alike. Each is huge: About $4 billion in sales last year. Each sells to specialty stores — and the big department stores like Macy’s, Lord & Taylor and Bloomingdales.

Each apparel maker owns or licenses dozens of well-known brand names.  Jones has Jones-New York, Polo Jeans, Nine West and Anne Klein. Liz Claiborne has Claiborne, Dana Buchman, Ellen Tracy and its recently acquired young urban brand, Enyce.

There’s something else the companies have in common: Each declined to be interviewed for this story.

But investment banking consultant Gail Zauder at Elixir Advisors says there are important differences.  (Full disclosure: She's worked on Liz Claiborne deals in the past.)

“Jones has really grown through acquisition,” she said. “Liz has not. Liz has acquired a portfolio of companies and has really run a portfolio acquisition strategy, where Jones has purchased big companies.

Zauder says the two firms also have a “very healthy respect for each other.

“I think they’re very interested in what the other guy's doing,” she said. “But I don’t think its an obsessive maniacal relationship.

The rivalry between these two key players may intensify this year.  Liz Claiborne has a new brand called Realities, while Jones is launching its Signature line. 

While the new lines may help mall traffic and department store sales, each will once again be competing for the same customers. There's a designer frenzy right now to capture market share, according to Standard & Poors industry analyst Marie Driscoll.

Portfolio manager Lori Wachs follows retail, apparel and luxury names for Delaware investments, with $85 billion under management.

“I think they make the obvious knocks on one another that I've heard at investment conferences,” she said. “Jones will say, ‘Oh we wouldn’t look at any company under $100 million dollars because it wouldn’t move the needle. Where Liz would counter that” ‘Yes, but enough small companies can move the needle. In total, it does make a difference!’”

It’s a longstanding and measured rivalry, say analysts.  Liz Claiborne and Jones are also rivals for the affections of investors.  Each company has been cited by analysts as good bets for the next year precisely because they're so diversified.  When one of their brands is in, another may be out. But that's a whole lot less important when you have dozens of brands in the stable.

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