By  on October 27, 2006

NEW YORK — Liz Claiborne Inc. posted a third-quarter profit decline Thursday of 16.2 percent, due in part to disappointing results in its European retail business. The apparel firm also lowered fiscal year 2006 guidance.

For the three months ended Sept. 30, net income dropped to $95.2 million, or 93 cents a diluted share, from $113.5 million, or $1.06, in the same year-ago quarter. Excluding charges such as restructuring costs, adjusted diluted earnings per share was 96 cents, or 3 cents below the Wall Street consensus estimate. Sales gained 2.5 percent to $1.37 billion from $1.34 billion.

For the nine months, net income dropped by 24.1 percent to $181.5 million, or $1.75 a diluted share, from $239.1 million, or $2.20, a year ago. Sales rose by 4.8 percent to $3.67 billion from $3.65 billion.

The Liz Claiborne wholesale apparel business was a strong performer at retail for six months, and an upgrade to its styling and quality suggests a growth opportunity in 2007, management said on a conference call. The company also pointed to the planned launch of two brands in the spring exclusively at J.C. Penney Co. Inc., Liz & Co. for women and Concepts by Claiborne for men, as "substantial opportunities" for volume and profit next year.

Sales outside the U.S. were up 16 percent and represent 28 percent of year-to-date revenues versus 26 percent a year ago. Management said the percentage should increase due to opportunities for the Juicy Couture and Lucky brands in Europe, Asia and the Middle East.

The company said its Ellen Tracy and Dana Buchman labels are "significantly healthier businesses" than in the first half, as evidenced by improved sales, lower markdowns and higher margins. Management said the future of Juicy extends far beyond domestic wholesale. The focus for Juicy will be on executing a multicategory, multichannel and multigeography strategy for the brand.

Another fashion highlight for the quarter was the strong performance of status denim, in which the Lucky brand continued to do well in apparel and nonapparel categories. The other status denim brand that did well was DKNY Jeans.

Regarding its outlook, the company said it expects higher restructuring costs to impact earnings. Full-year EPS is pegged between $2.50 and $2.55, down from the previous guidance range of $2.58 and $2.73.

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