REFILE-UPDATE 3-Liz Claiborne sees Q4 loss, amends credit

Tue Jan 13, 2009 12:31pm EST

(Refiles to drop extraneous word in headline)

* Sees Q4 loss of 0-15 cts/shr; prior view was for profit

* Amends credit facility to $600 mln from $750 mln

* Extends maturity to May 2011 from October 2009

* Shares fall 3.4 pct (Recasts, adds analyst comment, updates share move)

By Martinne Geller

NEW YORK, Jan 13 (Reuters) - Liz Claiborne Inc LIZ.N warned investors that it would likely post a quarterly loss instead of a previously expected profit due to deep discounts on its clothing, sending its shares down more than 3 percent.

The owner of the Juicy Couture, Kate Spade and Lucky Brand chains also announced on Tuesday that it had trimmed the amount of its revolving credit facility and extended the time frame.

The news initially sent Liz Claiborne shares 11 percent higher as investors had been relieved over the company's ability to meet debt covenants, but concerns soon mounted over how long it would suffer sales declines in a recession.

"Amending the credit facility was great in that it gives them additional flexibility financially, but the overall retail environment continues to be really challenging and the fourth quarter is definitely reflective of that," said Michelle Chang, analyst at Morningstar.

Citigroup analyst Kate McShane noted that the new forecast highlighted "the likely prolonged nature of Liz's overall turnaround" due to the recession.

Despite picking up in the last few weeks of the quarter, same-store sales at Juicy Couture, Lucky Brand and Kate Spade fell at a mid-teen percentage rate. Same-store sales at the Mexx chain fell 12 percent, the company said.

As a result, Liz Claiborne now expects fourth-quarter results to range from nil per share to a loss of 15 cents per share. That compares with its earlier forecast calling for earnings in the range of 19 to 24 cents per share.

Analysts on average had been expecting a profit of 19 cents per share, according to Reuters Estimates.

"Needless to say, the operating environment in the fourth quarter was the most challenging we have experienced in decades," Chief Executive William McComb said.

CREDIT EXTENSION

But Liz Claiborne also succeeded in extending its credit facility, a move taken by other retailers in recent weeks such as Staples (SPLS.O), Jones Apparel JNY.N and Macy's (M.N) and one that could signal some thawing of credit markets.

Liz Claiborne's new credit facility, arranged by JP Morgan Securities and Banc of America Securities, is for $600 million, down from $750 million. The company said that is appropriate for its needs following recent divestitures.

The smaller facility matures on May 31, 2011, whereas the existing facility was set to mature in October 2009.

Given the frozen credit markets, investors worried that Liz Claiborne would be unable to renegotiate its credit, or that it could default on covenants, especially since its business has been so battered by the slowdown in consumer spending.

"We know that the financial community has been closely monitoring this transaction in light of very challenging credit market conditions," said McComb.

"While we continue to aggressively manage our balance sheet and preserve liquidity, this amendment and extension affords us stability in the face of a most uncertain 2009," he said.

Liz shares had tumbled nearly 84 percent over the last four months through Monday's close, compared with a 32 percent decline for retail shares in general, as measured by the Standard & Poor's Retail Index .RLX.

The new facility gives the company a secured asset-based structure and eliminates a leverage covenant and an asset coverage covenant, but it increases fees and interest rates.

McComb said the company paid down debt in the fourth quarter, ending the year with total debt of $745 million, which is below the $750 million to $775 million range it predicted.

Liz Claiborne shares fell 10 cents or 3.4 percent to $2.87 after trading as high as $3.34 earlier in the session. (Additional reporting by Michele Gershberg, editing by Dave Zimmerman and Matthew Lewis)

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