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Claiborne Banking on Spring Relaunches

Liz Claiborne Inc. is hoping to generate some positive news this spring with the relaunches of four of its brands.

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Liz Claiborne Inc. is hoping to generate some positive news this spring with the relaunches of four of its brands.

Although the economy will likely offset what had originally been hoped to be the beginning of the company’s turnaround, successful relaunches of the Liz Claiborne brand, Claiborne men’s brand, Dana Buchman for Kohl’s and Kate Spade could create positive momentum to counter what has been a tough 2008 for the $4 billion vendor.

“The product launches next year are unbelievably important,” said chief executive officer William L. McComb. “I’m not going to tell you it will break beyond this consumer malaise, but our brands will put their absolute best foot forward. I’m thrilled to get our product on the shelves — it’s been a long time with me talking about these changes coming.”

The following product relaunches, which McComb set in motion when he took over two years ago, come to fruition this spring, which may prove to be the toughest season yet at retail:

• Liz Claiborne: McComb recruited Isaac Mizrahi last January to take over as creative director of the vendor’s flagship Liz Claiborne brand. The spring relaunch of the better-priced brand, which has seen its wholesale volume cut in half from its heyday to about $800 million, has received rave reviews from retailers who have seen the first line. Even so, between the economy and exiting about 200 unprofitable doors, the brand’s volume may actually fall for spring, though margins are expected to increase to about 10 percent.

• Claiborne: Right before tapping Mizrahi, McComb appointed John Bartlett to design the Claiborne better-priced men’s sportswear line, which will be called Claiborne by John Bartlett.

• Kate Spade: Spring is the first collection under the direction of Deborah Lloyd, president and creative director, who McComb hired in October 2007 from Banana Republic. As the smallest of the direct brands on which Claiborne has banked its future, Kate Spade’s growth is key to the success of the parent company.

• Dana Buchman: The former bridge brand discontinued its wholesale business to upscale specialty stores and department stores last spring, and is relaunching as a moderate brand exclusive to Kohl’s this spring.

If the launches go well, it would be welcome news for the public company, whose stock has been trading around $2 a share since Claiborne posted a third-quarter loss of $68.7 million on sales that slid 16 percent to $1.01 billion. Last week, Moody’s Investors Service cut Claiborne’s debt ratings to “Ba2,” two levels below investment grade, based on expected weak earnings and low consumer spending. Right after that, Standard & Poor’s replaced Claiborne on the S&P 500 stock index with Dun & Bradstreet Corp., based on Claiborne’s stock declining about 86 percent this year to a market value of $265 million, which S&P said is more appropriate for inclusion in its SmallCap 600 index.

Claiborne is working with J.P. Morgan on getting a $650 million asset-based revolver as the vendor flips from a senior unsecured structure. The new line would replace a $750 million unsecured revolver expiring in October 2009, which Claiborne announced it would seek to renew back in August 2007. Rumors about whether Claiborne will be able to get such a loan are at the heart of the stock price, McComb said.

“Whether it’s fair or not, we’re being penalized for getting a 15-month jump for getting a credit loan for liquidity,” said McComb. “Once it was rumored with the economy that the banks are falling apart, the market began pricing it as a binary event, and if there was any likelihood we would not get the liquidity by November 2009, they wanted out of the stock. That sent us to $10, and sending us to $10 sent us to $5, and sending us to $5 sent us below that, because some of the biggest investors have ties to market caps of certain levels and are forced to sell off when it falls. And it all comes back to rumors about liquidity.…A stock price like this stinks, but I’m confident in what we are doing in management to manage the situation.”

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