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NEW YORK — Liz Claiborne Inc. on Wednesday posted a decline in fourth-quarter profits partly due to stock-option expenses and lower wholesale sales, and said it would significantly expand its retail store count to at least 1,400 units.

Company executives on a conference call with analysts said the firm could have an average of 200 stores across seven formats, or between 150 and 200 units for its brands such as Lucky, Juicy Couture and Sigrid Olsen.

For the quarter ended Dec. 31, net income fell by 5.3 percent to $78.3 million, or 74 cents a diluted share, from $82.7 million, or 75 cents, in the same year-ago period. Sales were essentially flat, inching up by just 0.2 percent to $1.2 billion. Wholesale sales fell by 7.4 percent to $647 million, mostly due to declines in the firm’s domestic Liz Claiborne, Ellen Tracy, Sigrid Olsen and licensed DKNY Jeans men’s businesses. Earnings per share came in ahead of Wall Street estimates by 2 cents.

Paul Charron, chairman and chief executive officer, who will retire and the end of the year, told analysts during the conference call, “In the face of a challenging market environment we are continuing to focus on those things we can control. We’re taking significant steps to take costs out of the business and streamline our operations to more efficiently manage our brand portfolio and more closely align our business with the rapidly changing customer and consumer needs.”

During the quarter, the company discontinued its Kenneth Cole women’s wear license. Wholesale nonapparel sales rose by 11.9 percent to $174 million due to increases primarily in its cosmetics, Juicy Couture, Lucky Brand and midtier handbags, its Money and Sigrid Olsen midtier jewelry and fashion accessories businesses. On the retail front, sales rose 10.4 percent to $368 million, due in part to new store openings, a 6 percent gain in same-store sales in its specialty store business and a 2 percent comps increase in its outlets business.

For the year, income rose by 1.2 percent to $317.4 million, or $2.94 a diluted share, from $313.6 million, or $2.85, last year. Sales gained 4.6 percent to $4.85 billion from $4.63 billion.

“In our view, Liz Claiborne has the strongest portfolio of brands in the apparel industry and the company remains fundamentally solid. Furthermore, its diversified portfolio enables the company to better weather uncontrollable environmental factors that cause extreme duress on some of its key competitors, particularly those that have more exposure to one consumer segment,” wrote analyst Jennifer Black of Jennifer Black & Associates.

This story first appeared in the March 2, 2006 issue of WWD. Subscribe Today.

Black said the company has diversified its exposure to different consumer groups and lessened its exposure to the department store channel by building its own retail businesses.

Charron said on the call that macroeconomic trends such as high energy costs, rising interest rates and concern over increasing inflation all have the consumer pulled in a number of directions that continue to create an uncertain operating environment.

The ceo explained that the company is moving forward on global expansion for its highest growth brands such as Juicy Couture, Lucky Brand, Sigrid Olsen and Mexx. The apparel giant also recently streamlined its operations to enable it to be a “nimbler” organization, one that can increase profitability over time and more effectively integrate future acquisitions.

Charron said the company is looking at multiple merger and acquisition opportunities and is “encouraged by what we see.” He also pointed out to analysts that the company’s acquisition criteria remained unchanged: “We’re interested in brands that occupy unique niches in the marketplace … We are particularly focused on assets that will further bolster our direct-to-consumer, men’s, international and accessories businesses.”

Regarding the company’s retail growth plans, Charron said the plan is “to open between 100 and 125 specialty retail stores globally in 2006,” and that the expectation is to maintain an aggressive store opening pace.

“Each of these brands has a unique aesthetic with an especially clear target consumer and positioning in the marketplace,” Charron added.

Charron said Juicy Couture, for example, “redefines luxury for today’s more casual consumer.” For Lucky, he said the company is “pursuing a strategy that capitalizes on its rock ‘n’ roll, American heritage to create a truly unique, global denim based, lifestyle retailer.”

“For Sigrid Olsen, we’re looking to expand our domestic retail presence by about 20 to 24 stores annually … ultimately envisioning this as a 150-plus store chain,” Charron said.

The company’s retail strategy reflects a growing trend on the supplier side of the market where designers and vendors take greater control of their destinies by becoming more vertical. Companies such as VF Corp., Tommy Hilfiger Corp., Polo Ralph Lauren and Jones Apparel Group have bolstered their retail positions in recent years.

During the call, Charron said in closing he was “very proud” of what has been accomplished since 1994 when the company was dependent on a namesake brand to now a powerful, multibrand, multichannel, multigeography business. He concluded that the end of 2006 is the “ideal time for me to step aside. Twelve years is a long time to sit in one of these chairs.”

He said the search for his successor is ongoing, and involves internal and external candidates.

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