Ann Taylor takes over 40 Liz Claiborne locations

One brand's loss is another's gain. To achieve a stronger foothold in the off-price world, women's retailer AnnTaylor Stores Corp. will take over 40 factory outlets being closed by apparel brand Liz Claiborne Inc.

Ann Taylor announced the move Thursday, adding that 35 of the spots will be branded as Ann's lower-priced Loft division, while five will house the company's namesake Ann Taylor merchandise.

“We had identified our highly productive factory outlet channel as an area for future growth, particularly for our Loft brand,” Ann Taylor Chief Executive Kay Krill said in a statement. “This extraordinary opportunity to open premium store locations significantly and efficiently accelerates our planned expansion and represents meaningful growth for our very successful Loft outlet business.”

She added that, nationally, the extra outposts will create 1,000 jobs.

The new factory stores will open during the second quarter of fiscal 2011 and are expected to generate $75 million in revenue. Capital expenditures for the takeover of Liz's leases are estimated to be $25 million, the company said.

Retail experts applaud the move on Ann Taylor's part. The outlets give the company a way to clear out excess product and expand to more markets.

“Given the current environment and productivity from their factory locations, we believe it is a prudent strategy,” said Betty Chen, vice president of equity research at Wedbush Securities Inc. “Moreover, with 500-plus Loft stores and 265-plus Ann Taylor Stores, we do believe expanding in the outlet center will provide the company will more high-margin growth opportunities.”

In July, Liz Claiborne announced it would be closing all of its 87 Liz Claiborne-branded factory outlets. Chief Executive William McComb said the company would instead focus on its four direct brands—Kate Spade, Lucky Brand Jeans, Juicy Couture and Mexx. Once a staple at higher-priced department stores, the Liz Claiborne label has shrunk to a fraction of its size.

Over the summer, it launched exclusively at J.C. Penney, and the Isaac Mizrahi-designed Liz Claiborne New York now sells only on QVC. The deal with Ann Taylor allows Liz Claiborne to get rid of the unwanted outlet leases, without paying early termination fees.

SOURCE: Crain's New York Business.com By Adrianne Pasquarelli