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Fifth & Pacific Trims Q2 Loss

Group cuts losses, sales fall 6.5 percent.

Shares of Fifth & Pacific Cos. Inc. shot up 22 percent Thursday after the company narrowed its second-quarter loss and stood by its full-year guidance, saying strength at Kate Spade would offset a stumble at Juicy Couture.

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Fifth & Pacific’s stock gained $2.03 to $11.28 — the biggest percentage gain since the company said in October that it would sell the Liz Claiborne brand to J.C. Penney Co. Inc. and pay down debt.

Fifth & Pacific reiterated that it would post adjusted earnings before interest, taxes, depreciation and amortization of $125 million to $140 million this year.

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Corinna Freedman, an analyst at Wedbush Securities Inc., said some investors were betting the firm would back away from its guidance because of weakness at Juicy.

“They remain on track, and they originally said Juicy could be a little bit worse but that it could be offset by better results at Kate,” Freedman said.

The analyst also noted that Kate Spade has gone on the offensive in reaction to competition from Michael Kors and Tory Burch. The brand currently has 83 doors and plans to open an additional 40 to 45 by the end of next year.

Overall, Fifth & Pacific’s net losses tallied $52.1 million, or 48 cents a share, which compared with red ink of $89.9 million, or 95 cents, a year earlier. Adjusted losses from continuing operations were 9 cents a share, better than the 12 cents analysts expected.

Sales for the three months ended June 30 fell 6.5 percent to $335.9 million from $360.3 million.

Kate Spade saw operating profits of $2.1 million for the quarter as sales grew 48.1 percent to $100.9 million. The brand is now almost as large as its corporate cousins Lucky Brand and Juicy.

Lucky’s operating losses totaled $11.5 million as sales gained 15.3 percent to $112 million. Juicy turned in operating losses of $23.6 million on a 10.4 percent decline in sales to $104.9 million.

Chief executive officer William L. McComb told analysts on a conference call that the new Juicy product launched earlier this year has been well received but that the brand has “many operational challenges to fix.”

McComb said Juicy cut back too much on inventory.

“For each of the deliveries from January through June, we initially allocated anywhere from 20 to 30 percent fewer units,” McComb said. “This was the result of being overly conservative, but equally, just plain poor planning.” To help fix the operational issues the brand named Tom Linko chief financial officer last month.

Juicy’s outlet business is also lagging as the stores try to clear merchandise that was made before the brand’s recasting this year. McComb also acknowledged that the brand’s handbags “lacked the relevance, newness and punch we needed.”

Even so, McComb said he remained “quite optimistic” since the brand has made progress reestablishing its image.