Liz Claiborne Inc. cut its losses for the third quarter and continued to predict a return to profitability, but the company remains in flux with department stores cutting back Juicy Couture; turnarounds in progress at Mexx and Lucky Brand, and the namesake brand just putting down roots at J.C. Penney.
Chief executive officer William L. McComb told WWD the company is on track and following through on its strategic plan. However, he did note that margins over the holiday season could be pressured, not so much by higher raw material costs but by a more promotional environment across the industry.
By way of example, McComb pointed to 70-percent-off sales at some of the specialty store competition. “Those numbers are a little higher than what you’d normally see in October,” he said.
Third-quarter net losses attributable to the company narrowed to $62.7 million, or 67 cents a diluted share, from $90.5 million, or 96 cents a year ago. Sales for the three months ended Oct. 2 fell 13.6 percent to $658.3 million from $761.7 million.
Adjusted for restructuring costs and other charges, Claiborne’s losses tallied 24 cents a share. In general, Wall Street seemed to like what it saw in Claiborne’s third quarter and sent shares up 8.8 percent to $6.78 in New York Stock Exchange trading Thursday.
On a conference call with analysts, McComb reiterated the firm’s view that it would post adjusted earnings of at least $1 a share in 2012.
Sales at Juicy Couture increased 11.3 percent to $148 million for the quarter on a 1.3 percent rise in comparable-store sales. An improvement in on-time deliveries helped boost top-line results versus the first half, but the brand’s wholesale profile continues to shrink.
“Juicy achieved these results despite ongoing rationalization of the [domestic department store] wholesale business, where sales are down versus last year and will probably be down again in the fourth quarter,” McComb said. He added that the change in mix was appropriate given the unit’s focus on owned stores.
Comps at Mexx slid 2.6 percent and Lucky Brand’s registered a 10.2 percent decline for the quarter.
“With both Mexx and Lucky Brand, we’re seeing what happens when you take a business that has suffered long-term decline and radically changed it with brand-appropriate product and marketing,” McComb said. “You get immediate conversion of full price on some great items. Comp-sales results begin flashing to positive in what I’ll call a blinking pattern. Traffic can remain sluggish, but as the store windows and marketing campaign start to stimulate new interest, this will begin to change. Traffic lags, conversion leads.”
Sales from the firm’s partnered brands unit declined 32.4 percent to $180 million, mostly reflecting the $82 million drop in revenues attributed to the transition of the Liz Claiborne brand to Penney’s, where it is now sold exclusively under a licensing agreement.