Forget the swine flu — the “savvy shopper syndrome” is what currently ails fashion, said William L. McComb, chief executive officer of Liz Claiborne Inc., and it’s still spreading.

This story first appeared in the May 14, 2009 issue of WWD. Subscribe Today.

Feverish bargain hunting is making life hard for vendors such as Claiborne, which saw its first-quarter losses nearly triple on a 28.8 percent sales decline. Investors were prepped for the bad earnings news but still took the losses hard and pushed the stock down $1.51, or 26.2 percent, to $4.26. The stock traded as high as $6.55 last week after Goldman Sachs predicted Claiborne could be ready to bottom out and that “fundamental change is afoot.”

Consumers are “feeling the need to be gratified emotionally by being smart” and not paying full price, McComb told WWD.

The shopping phenomenon, which began last fall, is particularly apparent in the high-end department stores selling Claiborne’s Juicy Couture, Lucky Brand Jeans and Kate Spade brands that have seen their overall sales nosedive.

McComb said Saks Fifth Avenue, Nordstrom, Bloomingdale’s and Neiman Marcus are now promoting these three brands with the depth and frequency of retailers like Macy’s. At least half of Juicy, Lucky and Kate Spade’s first-quarter unit sales at wholesale were marked down 30 percent or more, forcing Claiborne to lower prices in its own stores dedicated to the brands.

“The stakes change a little bit in terms of the overall economics in a down market,” said McComb, when asked about the dynamic. “It’s important that our productivity is protected. Our distribution strategies may change.” The ceo declined to make any projections, but said the leaders of the individual brands were constantly reevaluating their business plans.

Juicy, Lucky and Kate Spade, along with the Isaac Mizrahi-designed Liz Claiborne New York line, are the cornerstones of the company’s U.S. business, which has suffered through a tortuous restructuring and now the recession.

First-quarter losses widened to $91.4 million, or 97 cents a share, from $31 million, or 33 cents, a year earlier. After adjusting for special items, losses from continuing operations tallied 37 cents a share, worse than the 23-cent loss analysts projected. Sales for the three months ended April 4 fell 28.8 percent to $779.7 million from $1.1 billion.

The discounting of Juicy rang alarm bells for Marie Driscoll, an equity analyst at Standard & Poor’s, who lowered her rating on the company’s stock to “sell” from “hold” after first-quarter results came in worse than expected.

Juicy, she said, is a striking example of what is happening to brands with exposure to higher-end stores.

“Those companies really wanted to have Juicy in their stores,” Driscoll said. “The vendor doesn’t have control of what they’re doing on the store floor. It just destroys the value of the brand because why would you ever want to pay full price again? The luxury department stores are eating them up and spitting them out. They’re just not treating the brand with the tender loving care that it needs.”

McComb, who has reengineered the company over the last few years, said good things are coming. “We do believe that this quarter will mark the bottom in terms of the degree of earnings,” McComb said.

Claiborne also amended its revolving credit agreement so that, until the second quarter of 2010, its fixed charge coverage covenant will only be in effect when the availability under the agreement falls below a certain level.

Late Wednesday, the company said Elizabeth Reeves, senior vice president and chief human resources officer since last August, would leave the firm May 31. Her responsibilities will be assumed by other executives at the firm, a spokesman said.