By  on March 2, 2006

NEW YORK — Liz Claiborne Inc. on Wednesday posted a decline in fourth-quarter profits partly due to stock-option expenses and lower wholesale sales, and said it would significantly expand its retail store count to at least 1,400 units.

Company executives on a conference call with analysts said the firm could have an average of 200 stores across seven formats, or between 150 and 200 units for its brands such as Lucky, Juicy Couture and Sigrid Olsen.

For the quarter ended Dec. 31, net income fell by 5.3 percent to $78.3 million, or 74 cents a diluted share, from $82.7 million, or 75 cents, in the same year-ago period. Sales were essentially flat, inching up by just 0.2 percent to $1.2 billion. Wholesale sales fell by 7.4 percent to $647 million, mostly due to declines in the firm's domestic Liz Claiborne, Ellen Tracy, Sigrid Olsen and licensed DKNY Jeans men's businesses. Earnings per share came in ahead of Wall Street estimates by 2 cents.

Paul Charron, chairman and chief executive officer, who will retire and the end of the year, told analysts during the conference call, "In the face of a challenging market environment we are continuing to focus on those things we can control. We're taking significant steps to take costs out of the business and streamline our operations to more efficiently manage our brand portfolio and more closely align our business with the rapidly changing customer and consumer needs."

During the quarter, the company discontinued its Kenneth Cole women's wear license. Wholesale nonapparel sales rose by 11.9 percent to $174 million due to increases primarily in its cosmetics, Juicy Couture, Lucky Brand and midtier handbags, its Money and Sigrid Olsen midtier jewelry and fashion accessories businesses. On the retail front, sales rose 10.4 percent to $368 million, due in part to new store openings, a 6 percent gain in same-store sales in its specialty store business and a 2 percent comps increase in its outlets business.

For the year, income rose by 1.2 percent to $317.4 million, or $2.94 a diluted share, from $313.6 million, or $2.85, last year. Sales gained 4.6 percent to $4.85 billion from $4.63 billion.

"In our view, Liz Claiborne has the strongest portfolio of brands in the apparel industry and the company remains fundamentally solid. Furthermore, its diversified portfolio enables the company to better weather uncontrollable environmental factors that cause extreme duress on some of its key competitors, particularly those that have more exposure to one consumer segment," wrote analyst Jennifer Black of Jennifer Black & Associates.

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