WWD.com/business-news/financial/claiborne-posts-loss-1854798/
government-trade
government-trade

Claiborne Posts Loss

Third-quarter loss totals $68.7 million.

In Liz Claiborne Inc.’s “A Tale of Two Cities” model, neither city is immune from the macroeconomic malaise, driving the company to a third-quarter loss of $68.7 million.

This story first appeared in the November 11, 2008 issue of WWD.  Subscribe Today.

For the three months ended Oct. 4, Claiborne suffered a loss of 73 cents a diluted share, down from a gain of 33 cents, or $33.1 million, in the third quarter of last year. The loss from continuing operations was 10 cents a share, in line with guidance the company released on Oct. 24.

Sales slid 16 percent to $1.01 billion from $1.21 billion, driven down by decreases in the partnered brands segment as well as in Mexx on the direct brand side.

Ending a winning streak led by consistent sales gains of about 50 percent from Juicy Couture, the direct brands segment experienced a 2 percent sales decrease to $617 million, dragged down by Mexx. Excluding the impact of licensing the Juicy and Lucky fragrance operations in the second quarter of this year, sales increased 2 percent, according to the company.

The biggest of the direct brands, Mexx, saw sales fall 15 percent to $311 million, excluding the impact of foreign exchange rates. Juicy’s sales slowed to a more modest 7 percent gain to $144 million. Lucky had sales increases of 2 percent to $111 million. The smallest direct brand, Kate Spade, saw 47 percent sales growth to $29 million.

Sales of the partnered brands — which were suffering even before the economy turned — declined 31 percent to $398 million. Of the $180 million decline, $159 million is from brands that have been licensed or closed since last year.

The company also presented adjusted earnings per share from continuing operations that represented a gain of 39 cents, compared with a gain of 60 cents last year.

“Third-quarter adjusted EPS from continuing operations were 39 cents in this significantly challenging macroeconomic environment, primarily driven by better-than-forecasted expense controls, which offset a top line which was below our expectations,” said chief executive officer William L. McComb. “We will continue our intense focus on controlling the controllables…inventory, accounts receivable, astute brand execution and generating free cash flow to pay down debt. In terms of product and brand execution, we’ve spent the past year developing outstanding product for this spring — and although the environment will temper our results, we are as optimistic as we can be about how our brands will present at retail.”

For the first nine months of the year, Claiborne has posted a loss of $122.9 million, or a loss of $1.31 a share, down from a gain of $62.9 million, or 62 cents, last year. Sales declined 6 percent to $3.07 billion from $3.27 billion.

On an adjusted basis, for the first nine months, Claiborne posted an earnings gain for continuing operations of 83 cents, compared with adjusted gains of 94 cents for the first nine months of 2007.

Claiborne tightened its adjusted EPS guidance for the year to a range of $1.02 to $1.07, after narrowing it last month to $1 to $1.10 a share from a previous guidance of $1.40 to $1.60.