UPDATE 4-Liz Claiborne outlook grim; shares sink

Wed Mar 4, 2009 12:02pm EST

Related Topics

* Q4 adj loss 4 cts/shr; Wall St expected loss 9 cts/shr

* Gives no '09 EPS forecast; Sees "meaningful loss" in Q1

* Sees same-store sales down 15-25 pct through Q3

* Shares down 10.6 pct (Adds comments from conference call, analyst)

By Martinne Geller

NEW YORK, March 4 (Reuters) - Fashion company Liz Claiborne Inc LIZ.N warned on Wednesday that it will post a "meaningful loss" in the current quarter as it sees no improvement soon for retail sales, sending its shares down nearly 11 percent.

The owner of the Juicy Couture, Kate Spade, Lucky Brand and Mexx labels also said it would not provide a 2009 earnings outlook, due to "the highly uncertain environment."

To combat the recession, Liz is cutting 8 percent of its U.S. workforce, reducing its retail expansion plans and offering more clothing and accessories at lower prices.

The company is also rolling out a revamped version of its namesake brand designed by Isaac Mizrahi that it hopes will revive the brand's sales at department stores.

But the company forecast "a meaningful loss" in the first quarter, and said it was planning for the 2009 retail environment to be similar to the fourth quarter of 2008, which saw the worst holiday shopping season in nearly 40 years.

Liz Claiborne said its fourth-quarter net loss widened to $828.9 million, or $8.85 per share, from a year-earlier net loss of $435.7 million, or $4.55 per share.

Excluding charges related to cost-cutting and a trademark impairment, the company's loss from continuing operations was 4 cents per share. On that basis, analysts on average were expecting a loss of 9 cents per share, according to Reuters Estimates.

Total net sales fell 22.2 percent to $911.2 million, hurt by a steep loss in the company's wholesale division, which supplies department stores with clothes including the Liz Claiborne and Monet brands.

The strengthening U.S. dollar reduced Liz Claiborne's sales by $38 million, or 3.3 percent, in the quarter.

NEW STORES LONE BRIGHT SPOT

Department stores such as Macy's Inc (M.N), Kohl's Corp (KSS.N) and Saks Inc SKS.N used deep discounts over the holiday season to lure shoppers. Those discounts hurt sales and profits at department stores and their suppliers, which sometimes compensate stores for part of the markdowns.

As department stores consolidate and focus on their own brands, Liz Claiborne has opened more of its own retail stores to diversify its portfolio and rely less on department stores.

Sales in the wholesale division fell 38 percent to $322 million. On the retail side, sales fell nearly 29 percent to $238 million at the company's international Mexx stores, but rose 11 percent to $350 million at domestic stores.

Domestic retail sales rose 1.7 percent at Juicy Couture, 20.5 percent at Lucky Brand and 28 percent at Kate Spade, as each chain had more stores.

But U.S. same-store sales, or sales at stores open at least a year, fell 15 percent at Juicy Couture, 14 percent at Lucky Brand and 14 percent at Kate Spade. Same-store sales at Mexx fell 12 percent, due to declines in Europe and Canada.

"While we believe in the growth of the retail segment of Liz Claiborne's business, we think the company still has significant challenges in figuring out how to evolve its relationship with retailers," Citi analyst Kate McShane wrote in a research note.

McShane rates Liz Claiborne shares "hold" with "speculative risk," citing a significant lack of visibility on the wholesale and retail business and uncertainty surrounding the company's debt financing, turnaround strategy and senior management.

The company forecast same-store sales for all of its brands to decline 15 percent to 25 percent through the third quarter of 2009, with fourth-quarter sales results flattening as comparisons ease. It expects an adjusted operating loss in the first half of 2009, and an adjusted profit in the second half.

Liz dramatically cut its retail expansion plans for this year, saying it plans to open about 12 stores in 2009, down from more than 100 in 2008. Capital spending is expected to range from $60 million to $70 million this year.

To appeal to price-conscious consumers, the company is offering more items at lower prices, such as more T-shirts and basic jeans at Lucky Brand, more accessories at Juicy Couture and a greater assortment of less expensive bags at Kate Spade.

Liz Claiborne shares were down 30 cents at $2.52 on the New York Stock Exchange. They had fallen 84 percent over the last year through Tuesday's close. (Editing by Derek Caney, Dave Zimmerman)

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