NEW YORK — Liz Claiborne Inc. made up for declining first-quarter sales in its flagship and moderate brands with strength in more expensive goods and international markets.
The vendor, which markets a portfolio of brands stretching from Ellen Tracy to Enyce, also affirmed guidance for the year. Second-quarter projections, however, were below analysts’ expectations and investors traded shares of the firm down $1.92, or 5.2 percent, to $35.21 on the New York Stock Exchange Thursday.
Earnings during the first quarter rose 7.2 percent to $68.8 million, or 62 cents a diluted share, compared with a year ago, when profits were $64.1 million, or 59 cents.
Sales for the 13 weeks ended April 3 inched up 2.5 percent to $1.1 billion from $1.08 billion during the 14-week period a year earlier.
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Chairman and chief executive Paul Charron on a conference call with analysts said the retail environment was “somewhat more robust” than anticipated.
“This is attributable to several factors, including general consumer confidence about the economy and the stock market, seasonal weather patterns, which have facilitated more complete sell-through of heavier-weight items…and, perhaps most importantly, cleaner retail inventories coming out of the holiday season as a result of retailers focused on productivity metrics,” he said.
It appeared that little of this improved environment at retail has trickled down to Claiborne’s guidance for the year, which Charron said was conservative.
The company reaffirmed its full-year projections, which call for a sales rise of 6 to 8 percent, with earnings ranging from $2.70 to $2.77 a share.
For the second quarter, Claiborne projects a 3 to 5 percent sales increase with earnings of 41 to 43 cents a share. Analysts were looking for earnings of 44 cents a share in the second quarter.
“People kind of freaked out because the second-quarter guidance looked a little bit lower than what people expected,” said analyst Jennifer Black, president of Jennifer Black & Associates.
She said the company was taking a balanced approach to growth, though.
“The whole key to this company is to maximize its productivity on a per-square-foot basis [in stores] and generate the highest operating margin for each division on a long-term basis,” said Black.
Wholesale apparel sales for the quarter inched up 0.6 percent to $774.4 million, due in part to $57 million in revenues from the Juicy Couture and Enyce brands, acquired last year, and a $22 million benefit from currency exchange.
Offsetting these gains almost entirely was a $74 million decrease, resulting primarily from a 28.8 percent falloff in the Liz Claiborne brand and an 18 percent decrease in the moderately priced business.
Charron, in a phone interview, declined to predict when the Liz brand would again show growth.
“I have some internal targets,” he said. “We think that there’s no reason why the Liz brand cannot grow in the mid-single digits going forward, but we have to work our way though this migration of certain accounts to higher-priced, less broadly available options.”
The 144-door Macy’s West chain has cut back on its open-to-buy, or the preapproved amount a buyer can spend, on the Liz brand, said Charron. Likewise, Lord & Taylor recently stopped carrying the name in misses’ sportswear. In both cases, Claiborne has been able to pick up at least some of the slack by moving in other, higher-priced brands from its portfolio.
Claiborne introduced a more focused offering under the flagship brand to consumers this spring, combining several subbrands into one master label. Full-price sales of the Liz brand, which is being supported by a marketing campaign aimed at a slightly younger customer, increased 11 percent during the quarter.
The higher-priced bridge segment of the company’s portfolio, including the Dana Buchman and Ellen Tracy brands, generated the strongest performance in the quarter, while moderate, especially the Villager brand sold in Kohl’s and Mervyn’s stores, was among the weakest categories.
Kohl’s recently said it would roll out a line called apt. 9 for fall and is looking for 25 percent of its sales this year to come from private brands. Charron denied that Villager was being squeezed out, though.
“Villager is largely a highly profitable and extremely relevant brand for Kohl’s,” he said. “Kohl’s entire raison d’être has been national brands at lower prices and while many of these have been in the so-called commodity area, they’ve also embraced brands like Villager and Axcess.”
While wholesale apparel made up more than 70 percent of Claiborne’s sales in the quarter, the firm has been diversifying its base rapidly with retail stores.
Retail sales rose 13.6 percent to $208 million, with currency exchange and increased comparable-store sales in the specialty store business boosting results.
International sales, which are heavily dependent on the Mexx brand, rose 21.1 percent to $268.3 million during the quarter.