Liz Claiborne Inc. and fashion designer Narciso Rodriguez have severed their short-lived business relationship over a strategic disagreement, underscoring the challenges of operating a designer-apparel business in a sagging economy.Claiborne, which had sales of $4.5 billion last year and owns apparel brands such as Kate Spade and Juicy Couture, bought a 50% stake in Mr. Rodriguez's company in May 2007 for $12 million. The move represented midtier Claiborne's launch into high fashion.
People inside the company described the partnership as a culture clash for both sides, and a drain on management's energy during a time when Claiborne's bigger brands, such as the flagship Liz Claiborne label, were losing momentum. Some apparel-industry veterans questioned the acquisition, which took place right before Claiborne Chief Executive Bill McComb put 16 brands up for strategic review to streamline operations.
Under terms of the deal, Claiborne will cede all trademark rights to the designer's name. The company won't require payment and in fact may have to pay an additional sum to get out of the contract with Mr. Rodriguez, according to a person familiar with the matter.
Mr. Rodriguez now owns 100% of his company, which incurred a loss of about $15 million on revenue of about $4 million last year, according to people familiar with the business. "We entered into this agreement and were quickly confronted with the tough economic climate," said Mr. Rodriguez in an email. "This proved challenging for both sides. This is a time to explore different opportunities," including obtaining "the appropriate" strategic or financial partner.
Mr. McComb said that he and the designer had initially intended to expand the Narciso Rodriguez brand, but differences emerged as to how best to achieve growth.
"Our decision to terminate reflects our view that when two partners have increasingly divergent views on how to run or grow a business, both sides are better off terminating the relationship," Mr. McComb said in an email.
At first, Mr. McComb and Mr. Rodriguez hit it off, people close to the company say. But relations began fraying toward the end of last year when Janice Sullivan, the Claiborne executive hired to oversee the expansion of Mr. Rodriguez's business, resigned after three months on the job. Later, management suggested that Mr. Rodriguez shift some of his production from Italy to China, which offended him, according to people familiar with the matter. Mr. Rodriguez later suggested hiring a chief executive who would be based in Milan, a plan that Mr. McComb was uncomfortable with, according to these people.
Ms. Sullivan, who now runs the Calvin Klein Jeans business at Warnaco Group, declined to comment.
Mr. Rodriguez's brand, known for sleek, body-hugging dresses that sell for $2,000 and up, "didn't fit into Liz Claiborne's, a maker of fine woman's clothing, model" said Elaine Hughes, chief executive of E.A. Hughes & Co., an executive-search firm. "It was a square peg in a round hole."
