UPDATE 4-Liz Claiborne quarterly sales, forecast miss view

Tue Feb 23, 2010 1:53pm EST

* Q4 loss 18 cts/shr in line with Wall St estimates

* Q4 sales fall 14.5 pct to $778.8 mln; miss Street view

* Sees Q1 shr loss 45-55 cts vs Street view loss 30 cts

* Shares up slightly after sliding as much as 8 pct (Adds goals for 2010, 2012, executive comments)

By Martinne Geller

NEW YORK, Feb 23 (Reuters) - Liz Claiborne Inc LIZ.N reported a fourth-quarter loss that matched analysts' expectations but sales and a first-quarter forecast that fell short, hurt by weak sales at wholesale and at its Mexx store chain.

Shares in the fashion company were up 4 cents or 0.6 percent after losing as much as 8 percent earlier in the session.

Fourth-quarter sales fell more than 29 percent in the company's wholesale business, which supplies department stores such as Macy's Inc (M.N) and Nordstrom Inc (JWN.N). Domestic sales for its retail brands including Juicy Couture, Kate Spade and Lucky Brand fell 3 percent.

International sales, which include the Mexx chain, fell 21.6 percent, excluding the impact of currency. The weakness occurred mostly in Europe, where American-designed clothes failed to catch on with European consumers.

"It's a story of major product miss," said Chief Executive William McComb, noting that the Mexx Europe business produced a negative 31 percent operating margin.

Thomas Grote, a former Esprit Holdings Ltd (0330.HK) executive who joined Liz Claiborne last October as the Mexx CEO, likened the brand to a diamond in the rough and told analysts how he planned to polish it by improving its "outdated business model," its "ivory castle design not really linked to the consumer" and "lousy product execution."

"We feel comfortable that we can strike for break-even in 2011, and our plan is actually to grow the brand in the next five years beyond a $1 billion U.S. top line," Grote said.

SALES REMAIN WEAK

Liz Claiborne reported a net loss of $41.7 million, or 45 cents per share, for the fourth quarter ended Jan. 2, compared with a loss of $828.9 million, or $8.85 per share, a year earlier.

Excluding items, the loss was 18 cents per share, in line with analysts' estimates.

Net sales fell 14.5 percent to $778.8 million, missing analysts' expectations for sales of $820.7 million. Foreign currency exchange rates in its international business increased net sales by $28 million, or 3.1 percent, the company said.

Within U.S. retail, same-store sales fell 3 percent at Juicy Couture and 10 percent at Lucky Brand. Same-store sales rose 5 percent for the smaller Kate Spade brand.

"I would have liked to see stronger comps (same-store sales) from the specialty retail concepts considering the positive trends coming into the quarter," said Wall Street Strategies analyst Brian Sozzi in an email.

The company's gross margin improved to 48 percent from 45.6 percent in the year-earlier period, before the company made Hong Kong's Li & Fung Ltd (0494.HK) its global sourcing agent.

CEO McComb has sold, licensed, or closed a host of underperforming wholesale brands to focus on four high-potential brands with their own retail stores. Those actions have given the company more control by reducing its exposure to the volatile department store sector.

SHORT-TERM OUTLOOK, LONG-TERM GOALS

Liz Claiborne forecast a loss of 45 to 55 cents per share for the current first quarter on reported sales expected to fall 20 percent to 25 percent. Analysts had been expecting a loss of 30 cents per share.

For the full year, the company said it is planning for sales to fall about 10 percent, with "a stretch goal" of break-even adjusted operating income.

"Given the uncertainty of Mexx Europe performance and the timing of that turnaround, the year could result in either a modest adjusted operating profit or a modest adjusted operating loss," McComb said.

Beyond that, McComb laid out "a framework for 2012 threshold goals," calling for annual earnings per share of at least $1.00, $600 million or more of accumulated operating cash flow and operating income margin of 10 percent or higher, by the end of 2012. (Reporting by Martinne Geller, editing by Gerald E. McCormick and Derek Caney)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.