CLAIBORNE NET DOWN 48.9% IN SECOND QUARTER

Byline: THOMAS J. RYAN

NEW YORK--Earnings at Liz Claiborne Inc. tumbled 48.9 percent in the second quarter--the company's seventh straight quarterly profit decline.
Analysts, however, expect Claiborne's tighter control over inventories to improve profits in the second half over the depressed figures of last year.
In the quarter ended July 2, earnings fell to $15.9 million, or 20 cents a share, from $31.1 million, or 38 cents, a year earlier. Sales dipped 3.3 percent to $490 million from $506.9 million.
The earnings met the lower end of most analysts' forecasts for the quarter. They were looking for 20 to 22 cents a share. On the New York Stock Exchange, Claiborne's shares closed Monday at 20 1/4, down 1/4.
Gross margins in the three months declined to 34.5 percent of sales, down from 35.5 percent a year ago.
Selling, general and administrative expenses increased to 29.9 percent as a percentage of sales from 26.7 percent, reflecting increased costs from new retail stores and international expansion.
Samuel M. Miller, senior vice president of finance, said margins in the second quarter continued to be hurt by the selloff at distressed prices of inventory manufactured early in 1993 in anticipation of a pickup in orders in the second half. When the orders didn't arrive, Claiborne was forced to use steep markdowns to clear the merchandise, Miller said.
"Virtually all of this inventory has been disposed of as of the end of the second quarter," Miller said.
Miller said inventories were basically flat at the end of the second quarter against the 1993 quarter. Inventories had been up 6 percent at the end of the first quarter and up 13 percent at the end of 1993.
Though declining to offer specifics about each area, Miller said the company's various divisions are performing better. He said Claiborne has cut production in the core sportswear group, which accounted for 51 percent of sales last year, in order to gain more sales at full price.
He said the dress area has been improving, and accessories and Dana Buchman bridge sportswear continue to do well. Men's wear, he added, is "doing terrific."
While declining to make a forecast for the second half, he pointed out that the company would be going against easier comparisons.
Most analysts expect Claiborne's bottom line to pick up in the second half because of the thin year-ago numbers and the help of Claiborne's increased focus on maintaining full-price sales.
Third-quarter profits are expected to come in at around 55 to 58 cents a share, up from 47 cents a year earlier.
Fourth-quarter profits are expected to range from 37 to 41 cents a share, well above the 19 cents earned in the fourth quarter of 1993.
Nonetheless, the estimates are running well below the 77 cents earned in the third quarter of 1992 and 63 cents earned in the fourth quarter of 1992.
The estimates bring full-year 1994 profits to a range of $1.50 to $1.55, against $1.54 in 1993. For 1995, the analysts' earnings forecasts range from $1.72 to $1.80.
Laurence C. Leeds Jr., at Buckingham Research, said fewer markdowns should lead to improved profits in the second half and "considerably higher" profits in 1995.
"They've gone back towards their early methodology, which is keeping what they make in line with ordering patterns," Leeds said. "Claiborne will have substantially less product to sell at lower prices, and that will clearly help profits."
Todd D. Slater, at UBS Securities, said that besides the easier comparisons and "substantially lower" markdowns, the company should benefit from improvement outside the company's core sportswear group, including Dana Buchman, men's wear and dresses.
Slater said Claiborne's holiday bookings were "just fair" while the sportswear group is still "relatively sluggish." Slater said that while inventories were flat in the quarter, the fact that sales declined 3 percent shows that inventories "are still not where they should be."
Edward F. Johnson, at Johnson Redbook Service, expects higher margins in the third and fourth quarter to boost the bottom line but doesn't expect to see a pickup in sales until the market for women's sportswear and women's apparel in general improves.
"They're waiting for women to buy," Johnson said.
In the half, earnings slumped 41.2 percent to $43.3 million, or 55 cents, from $73.8 million, or 88 cents, a year earlier. Sales eased 0.7 percent to $1.03 billion from $1.04 billion.
"The tone of business continues to be difficult," said Jerome A. Chazen, chairman, in a statement. "However, we have initiated a number of programs and are exploring and pursuing a variety of initiatives and projects which we believe hold us in good stead in the future."
"We continue to view 1994 as a year where we have begun a far-reaching process of rebuilding and restructuring," Chazen added.
--Fairchild News Service

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