If an investor’s mantra is holding onto shares for the long term, then Liz Claiborne has been a solid performer in the past 25 years. In 1981, when the company went public, the Dow Jones Industrial Average was 970 and shares of Claiborne were priced at $19 (or what would be $1.19 now, adjusted subsequent stock splits). Today, the Dow is well over 11,000 and Claiborne stock is trading at about $39.
In the last five years, shares of Liz have been on a steady — but gradual — growth path, as the industry has dealt with massive department store consolidation, rising raw material prices and changes in sourcing, underlying the importance of speed to market initiatives. Nevertheless, Liz Claiborne’s annual net earnings have risen 65 percent from five years ago, while sales most recently hit $4.85 billion in 2005; the stock, over that time, has added roughly 70 percent.
Comparatively, shares of VF Corp. have added 80 percent over the last five years, as the company’s bottom line has nearly quadrupled and annual sales in 2005 hit $6.5 billion. Jones Apparel Group Inc. shares have fallen roughly 10 percent in the last five years, while net earnings have declined 11 percent and annual net revenues most recently totaled $5.07 billion.
Over the life of Liz Claiborne, one of the better long-term run-ups for Liz shares was from early 1995 through October 1997, when the stock jumped from between $5 and $6 to between $24 and $25. The company’s profitability was certainly a positive influence on the shares at that time. From the fiscal year ended Dec. 30, 1995, to the fiscal year ended Jan. 3, 1998, net earnings rose 45 percent, to $184.6 million, according to annual reports.
Shortly after, however, the stock suffered one of its biggest short-term declines in mid-1998 when it lost half its value; the shares fell to around $12 by late September from around $24 in late July. Profits in that quarter had dropped 6 percent to $62.7 million.
Most recently, shares of Liz lost about 7 percent from early January to early February, when the company had been bidding, along with Talbots Inc., to purchase women’s specialty retailer J. Jill Group. Talbots ended up winning and is acquiring J. Jill for $24.05 a share, a price Liz Claiborne later said was too high to please its shareholders, given its mid-November offer on J. Jill for $18 a share. Liz shares have regained about 15 percent from the early February low.
The company announced in late January that longtime chairman and chief executive officer, Paul R. Charron, would retire by the end of the year when his contract was up. A replacement has not yet been named, but the succession plan announcement has helped the stock steadily regain ground as this year has progressed.
With a forward price-to-earnings ratio of about 12 (based on estimated fiscal year 2007 earnings), shares of Liz are once again relatively in line with — but not poised to outperform — its peers. VF Corp. has a forward P/E of nearly 11, and Jones Apparel Group’s sits at around 13.5, meaning that shares of Jones have slightly more growth potential than Liz and VF Corp.
Still, with Jones’ announcement that it is putting itself up for sale, valuations on Liz could change.