CLAIBORNE CITES CASUAL LOOKS FOR PROFIT SURGE OF 21.5% IN FOURTH QUARTER
Byline: Jennifer L. Brady
NEW YORK — With casual collections and Dana Buchman bridge sportswear turning in star performances, more evidence of a revitalized Liz Claiborne Inc. emerged in the fourth quarter ended Dec. 28.
Profits in the quarter jumped 21.5 percent, while sales gained 8.3 percent. Earnings grew to $40.9 million, or 57 cents a share, topping average Wall Street estimates of 54 cents. In the year-ago quarter, Claiborne earned $33.6 million, or 45 cents.
Despite the gains, Claiborne stock closed on the New York Stock Exchange Tuesday down 2 3/8 to 41 1/4. One analyst attributed the drop to a conference call Tuesday where executives dampened sales expectations, stating that a previously expressed goal of annual 10 percent growth might be “tough” to get this year.
Sales in the quarter rose to $538.3 million from $497.1 million. Gross margins moved ahead to 40.6 percent of sales from 38.9 percent, but selling, general and administrative expenses moved up to 29.1 percent of sales from 28.7 percent.
The company noted that it had particularly strong profit and sales gains in its casual sportswear business — LizSport, LizWear and Liz & Co. — and its Dana Buchman bridge line.
In the full year, profits grew 22.7 percent to $155.7 million, or $2.15, from $126.9 million, or $1.69. Sales were up 6.5 percent to $2.21 billion from $2.08 billion.
Paul R. Charron, chairman and chief executive officer, said in a statement that “1996 was a year of noteworthy accomplishment.”
He said, “Among others, we increased our product focus with a resulting improvement in its performance at retail, successfully launched several new products, opened new channels of distribution, further refined our sourcing base and continued to enhance our management structure.”
In May 1995, the company began a three-year strategic plan, LizFirst, to lower expenses, cut inventories, improve delivery and reduce cycle times.
Charron added that the company made more progress toward its LizFirst inventory- and cost-reduction plans.
“We are encouraged by retail performance in the fourth quarter of 1996 and the early part of 1997,” he added.
Samuel M. Miller, senior vice president-finance and chief financial officer, said, “Although we remain cautious, we are optimistic about our ability to report continued improvement in sales and earnings in 1997.”
Jennifer Black Groves, an analyst at Black & Co., in Portland, Ore., said, “They have made tremendous progress and met or exceeded every goal they have set.”
She noted that the Dana Buchman line “drove the business” in the quarter, with strength in the Dana B. & Karen line, the casual career line extended from Dana Buchman in February 1996.
While the company has not broken out volume for Dana Buchman in 1996, analysts have placed sales as high as $195 million, against $136.2 million in 1995.
The company’s three casual sportswear lines added about $90 million to sales volume in the year, which included about $20 million from the introduction of Liz & Co. petites, Groves said.
In the year, analysts said same-store sales were down at Liz Claiborne stores but up more than 25 percent at its one Dana Buchman store. Same-store sales were also ahead at its Elisabeth stores, which offers better-priced large-sized career and casualwear. Outlet stores posted a 10 percent comp increase, with total sales up 16 percent, they said.
Going forward, Groves noted, “We think that one of the driving forces will be positioning Dana Buchman as a megabrand.” She added that she would not be surprised if the company expands its retail operations into international markets, particularly the Dana Buchman stores.
“Dana Buchman would be very well accepted in international markets,” Groves said. She raised her 1997 estimate by 5 cents to $2.45 and initiated an estimate of $2.80 for 1998.
Calling the quarter “fantastic,” Marie J. de Lucia, analyst at Rodman, Renshaw & Co., said the company indicated that not only were holiday sell-throughs strong, but they continue to be strong. “Order bookings for spring and summer are looking good,” she said.
De Lucia said casual continues to be “very strong,” with LizSport, LizWear and Liz & Co. logging double-digit sales gains for the year.
In its Special Markets business, First Issue, an exclusive line for Sears, Roebuck & Co., is in 325 doors and is trending well above expectations, she said. First Issue sales are estimated to be about $20 million in 1997.
Along with First Issue, the company’s Special Markets business consists of the newest moderate-priced collection, Emma James, as well as the Russ and Villager brands. As reported, Crazy Horse, which had been marketed exclusively by J.C. Penney on the West Coast, was temporarily shelved due to weak sales.
The Russ line will be introduced in 280 Kmart doors in August, de Lucia said. She added that the line is in 400 Wal-Mart stores and will be expanded into another 400 Wal-Mart units this year.
The Emma James line of relaxed career and dressy casualwear has just reached the upper-moderate department stores and will be sold in 400 doors, including Federated, Dillard and Dayton Hudson, this spring. First-year sales are estimated at $20 million.
Rodman’s De Lucia lifted her 1997 estimate by 5 cents to $2.50.
In addition to product improvement programs, image building has been a top priority. The company, which has avoided consumer ad campaigns for its apparel throughout much of its 20-year history, poured $25 million last year into a print and outdoor ad drive starring Niki Taylor and even installed a Times Square billboard in December. Claiborne held its first fashion show in two years for the press last October during the 7th on Sixth designer week in New York. The show, held at a vacant storefront at 452 Fifth Avenue, showcased LizWear, Collection, LizSport and some dresses.
Meanwhile, Claiborne launched a national TV campaign for its fragrances Curve for Women and Curve for Men on MTV and VH-1. The first flight ran in mid-September.
Meanwhile, Charron, who took over as ceo in May 1995, has restructured management to create a sense of empowerment among the 7,500 employees and expedite decision-making. The changes, which affected 20 or so executives, was effective last March. Under the new structure, responsibilities of certain division heads have been realigned, and operating divisions are now being led by an executive serving as division president or as vice president, general manager, depending on the size or complexity of the business.
Charron has also been hiring a slew of new executives — the most recent newsworthy addition being Denise Seegal, 42, whom he wooed from her post as president of CK Calvin Klein to become president of Liz Claiborne. She started in October.
On the financial front, Claiborne announced that its board boosted its stock-repurchase program up to an additional $75 million of common stock, or 1.7 million shares at current prices, bringing the total to $675 million.
As of Feb. 17, the company had purchased 21.5 million shares of common stock for $597 million, including $103 million expended in 1996.
The company has 71 million shares outstanding. Shares acquired will be available for use under the company’s employee stock plans and for other general corporate purposes.
Financial chief Miller said, “We continue to believe that deploying a portion of the company’s available cash in this manner is in the best interest of our shareholders.”