By  on August 5, 2010

William L. McComb believes Liz Claiborne Inc. is now “at a critical inflection point” where a years-long overhaul will put it on an upward trajectory, even if the consumer doesn’t come roaring back.

It’s a stake in the ground for McComb, chief executive officer and architect of the firm’s strategy, which has shipped the Liz Claiborne brand off to J.C. Penney Co. Inc. as a license, turned to Erin Fetherston to design Juicy Couture, cut inventory at Lucky Brand Jeans and installed new leadership at the ailing Mexx division.

McComb told WWD that the company is “a study in simultaneousness” with various initiatives “independently coming together.” And the shift is not reliant on a big turnaround in consumer spending, the prospects for which the ceo is relatively bearish. “This is an internally driven story,” he said. “Our act is coming together. The profit equation of our operation is coming together.”

Any unqualified statement of profitability — or, in this case, a return to adjusted operating profits in the second half to allow for some fiscal wiggle room — is a big deal for Claiborne, which has posted 11 consecutive quarters of net losses.

Even if Claiborne does return to the black, it remains very much an open question if the company can return to the position of prominence it once held in an industry renowned for ups and downs.

For their part, investors gave the company a big thumbs-up Thursday, pushing the stock up 69 cents, or 13.8 percent, to $5.68, its highest closing price since June 15.

Although net losses widened in the second quarter, adjusted losses tallied 19 cents a share, less severe than the 46 cent deficit Wall Street expected.

Claiborne expects second-half adjusted sales to fall 9 to 14 percent, but gross margins are slated to perk up 500 basis points as the Mexx business improves in Europe and the Liz Claiborne brand begins pulling in licensing dollars from Penney’s. That is expected to translate into adjusted operating profits of about $32 million for the second half.

Given the $100 million operating loss in the first half, that would still leave Claiborne in the red this year, but finally pointed in the right direction.

And that switch in momentum, should it come, will play out over an economic landscape that McComb described as “a prolonged stagnation. “

“You’re hearing good things and bad things both,” he said. “It’s just that there’s an absence of the rebound effect.

“While we feel good about the potential for second-half improvement, we are also realistic,” he told analysts on a conference call. “We still have a long way to go and a lot to prove. But from our perspective, we’re at a critical inflection point. We believe we are on the right track and looking forward to the future.”

Second-quarter net losses attributable to Claiborne widened to $86.8 million, or 92 cents a share, from $82.1 million, or 87 cents, a year earlier.

Sales for the quarter ended July 3 fell 15.5 percent to $569.8 million from $674.6 million. The retreat included a 19.4 percent decline at Lucky Brand, where the company aggressively adjusted inventories; a 13.8 percent drop at the division that includes Mexx, and a 28.8 percent decline in the firm’s partnered brands business as the Liz Claiborne brand makes the shift to a licensing-based model.

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