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Liz Third-Quarter Profits Fall on Lower Sales

Restructuring costs and weakness in key brands drive down bottom line 65.3% as strategic review speeds up.

Liz Claiborne Inc. delivered weaker third-quarter profits as the apparel giant found itself saddled with restructuring costs relating to its turnaround effort and declining sales from some key brands.


Net income for the period ended Sept. 29 dropped to $33.1 million, or 33 cents per diluted share, from $95.2 million, or 94 cents, in the previous year as sales fell 3.9 percent to $1.26 billion from $1.31 billion.

Chief executive officer William L. McComb said in a statement that initiatives “identified in the turnaround of Liz Claiborne Inc. are fundamentally on track. While third-quarter 2007 results are tough to look at, particularly compared to last year, they are consistent with what we forecasted back in May when we announced the significant changes in our earnings outlook for 2007.”

The drop in sales relates to weakness in its wholesale business. But McComb said the company has “accelerated the strategic review” on the brands it plans to sell, and reported solid results of its direct to consumer brands. The ceo said there was “an out-sized performance at Juicy Couture, solid profitability at Lucky Brand and strong fundamentals at Kate Spade.”

“Our Mexx Europe business saw weak sales and profits, but made substantial progress in launching dramatic initiatives to improve their operation over the next six quarters — spanning product, cost structure, and talent deployment,” McComb said. “In this sense, Mexx Europe is engaged in the same kind of turnaround that the overall corporation has initiated. While our Partnered Brands segment continues to challenge the overall performance picture, we are near completion on detailed merchandising, product design, and partnering initiatives to address the core Liz Claiborne brand specifically.”

For more, see Wednesday’s WWD.