SPECIAL CHARGE GIVES CLAIBORNE LOSS IN QUARTER
Byline: Thomas J. Ryan
NEW YORK — Liz Claiborne Inc., which has struggled since 1993 to turn around its women’s sportswear lines, reported a loss of $3.37 million in the fourth quarter, stung by a previously announced pretax restructuring charge of $30 million.
The charge, which covered the conversion or sale of the 77 First Issue stores and consolidations, reached the high end of Claiborne’s original forecast — announced on Dec. 19 — indicating a range of $20 million to $30 million.
Excluding the charge, earnings would have inched ahead 4.7 percent in the quarter to $15.6 million, or 20 cents a share, up from depressed earnings of $14.9 million, or 19 cents, a year earlier. In the 1992 quarter, Claiborne earned 69 cents a share.
Sales slid 5.4 percent to $514.7 million from $544.1 million.
For the year ended Dec. 31, Claiborne earned $82.8 million, or $1.06 a share, after the charge, against $126.9 million, or $1.54, a year earlier. Excluding the charge, earnings slumped 31.2 percent to $1.02 million, or $1.30. Sales declined 1.9 percent to $2.16 billion from $2.20 billion.
Jerome A. Chazen, chairman, said, “While we are disappointed with these results, we expect overall profitability will improve as a result of initiatives which we have been putting in place.” He said the company will continue to focus in 1995 on finding operating efficiencies.
Samuel M. Miller, senior vice president of finance, said results in the quarter were as expected, “reflecting a continuation of the highly promotional retail environment, which was evident during the Christmas season.”
He added: “While performance in several areas was strong, this was not sufficient to offset weak demand for our women’s better sportswear and moderate apparel offerings.”
Miller cited strong performances by men’s wear, Dana Buchman, and dresses. Dana Buchman, Claiborne’s bridge line, had “significantly improved” profits in the year, while both men’s wear and dresses returned to profitability, he said.
Meanwhile, analysts said sharp declines in Liz’s core women’s sportswear lines reduced total sales in the quarter and the year. Overall better women’s sportswear fell 12 percent in the year, analysts estimated. The better women’s sportswear lines account for about half of sales.
Its moderate apparel group, which consists of the Russ, Villager and Crazy Horse labels, grew to over $100 million in sales in 1994 from $79 million in 1993, but the group remained in the red. The labelswere acquired from Russ Togs in October 1992.
Analysts said results came in line with estimates, and shares of Claiborne on Tuesday rose 1/4 to 17 on the New York Stock Exchange. Wall Street looks for Claiborne to earn $1.40 to $1.50 this year.
Analysts said Claiborne is doing a better job at controlling costs and inventories. Operating margins in the quarter improved to 4.4 percent of sales from 3.8 percent. Inventories at year end were trimmed 3.1 percent to $423 million from $436.6 million.
However, they said the key will be a turnaround in its women’s sportswear lines.
“The balance sheet looks very strong,” said Margaret Whitfield, at Hancock Institutional Equity Services. “But the company is losing selling space to Jones Apparel in sportswear, and that will impact their business this year in terms of revenue.” She expects Claiborne’s overall revenue to be down 5 percent in 1995, with continued erosion in women’s sportswear.
Meanwhile, the latest financial results come as the company looks to a new top management lineup.
As reported, Paul R. Charron, vice chairman and chief operating officer who joined Claiborne in April from VF Corp., will become president and chief executive officer effective May 11 at the company’s annual board meeting. The ceo title has not been used officially since co-founder and designer Liz Claiborne retired in 1989, although Chazen effectively acted in that role. Continuing as chairman, Chazen, one of the architects of the firm’s growth in the Eighties, will focus on building international business and retail concept stores.
The title of president had been held by Harvey L. Falk, also a vice chairman, who retired Jan. 1 after 13 years with the firm. The company as of yet has no plans to fill the post of chief operating officer.
Since Charron came on board, he has made a number of restructuring changes in an effort to improve efficiency. These include splintering the three better-price sportswear lines — Lizsport, Lizwear and Collection — and putting them under three different presidents, while consolidating the three moderate labels into one unit.
Analysts noted that merchandising initiatives will start showing up in fall and holiday lines.
“They’ve brought in a lot of new people, so now we have to wait and see,” said Todd Slater, at UBS Securities. Whitfield said she expects Charron will be able to improve Claiborne’s organizational structure and reduce expenses, but, she added, he needs some strong merchandisers to get the core sportswear lines back in favor with customers.
Separately, Claiborne noted that it has repurchased 14.9 million of its shares at the cost of $409 million under its stock buyback program started in 1991. The company can buy an additional $41 million in stock under an extension on Jan. 11. Claiborne ended the year with about $330 million in cash. — Fairchild News Service