William L. McComb braced shareholders for a rough ride in his first-quarter earnings call three months ago — and for good reason. On Tuesday, Liz Claiborne Inc. said its earnings plummeted 65 percent in the second quarter, led by losses in the "partnered brands" segment, which is full of labels the $4.99 billion vendor is looking to sell.
For the quarter ended June 30, net income fell to $13.6 million, or 13 cents per diluted share, from $39.4 million, or 38 cents, in the year-ago period. Sales increased a modest 0.5 percent to $1.13 billion from $1.12 billion in the same quarter last year. It was the second quarter in a row that earnings fell by 65 percent.
"The major headlines for the second quarter were as expected," McComb told shareholders in a conference call.
The first six months of the year reflected similar numbers. Earnings fell 65.5 percent to $29.8 million, or 29 cents a diluted share, from $86.4 million, or 83 cents, in the same period last year. Sales slid 0.5 percent to $2.28 billion from $2.3 billion last year.
For the first time, Claiborne broke out results for its new divisions: direct brands — Juicy Couture, Kate Spade, Lucky Brand Jeans and Mexx — and partnered brands — which include the 16 under review for possible sale, including Ellen Tracy, Dana Buchman, Prana and Enyce. As expected, the direct brands saw sales growth, while the partnered brands declined. The direct brands division, on which the company is banking its future, made up 43.7 percent of sales for the quarter, up from 35 percent in the same quarter last year, before the company acquired Kate Spade.
The direct brands segment saw sales increase 25.5 percent to $494 million. Juicy Couture sales jumped 72.4 percent to $100 million. Lucky Brand Jeans revenues were up 26.2 percent to $108 million, though operating income and margins were down, primarily due to the doubling of marketing spending for Lucky and Juicy this quarter over the same period last year.
Mexx volume was flat, excluding the impact of exchange rates, with positive results in Canada offsetting losses in the core European market. Kate Spade was not in the Claiborne fold last year, but McComb noted it "continues to be on plan with a slightly dilutive profit margin."
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