NEW YORK (Reuters) - Liz Claiborne Inc LIZ.N is not expecting a return to the days of freewheeling consumer spending to lift its business, but is instead revamping operations to perform well in a cautious environment its chief executive says is “the new normal.”
“I’m probably consistent with some other voices who would characterize the environment as now stable — not a continuing decline — but stable at a very different level than we saw a year ago,” said Chief Executive William McComb at the Reuters Global Retail Summit in New York.
McComb expects retail sales to remain under pressure for some time as even shoppers who can still afford to splurge are being more savvy about spending.
“It’s not a matter of ‘what can she afford to spend?’ It’s ‘what’s the price that she can get it at?’” McComb said, adding that “it applies to dust mops and dish soap and soup and over-the-counter medicine as it does to apparel and luxury goods.”
Given this “new normal,” McComb said companies must rethink everything from what they sell and for how much and what costs they have to where they operate and where they can make money.
“I definitely think the ‘new normal’ is going to evolve,” McComb said. “I think it’s a mistake to try to plan your business around waiting for a return to what it was. That’s just not how fundamental change, big Darwinian change, occurs in the marketplace.”
Regarding the company’s forecast for same-store sales at its U.S. Lucky Brand, Juicy Couture and Kate Spade stores to fall 15 to 25 percent through the third quarter and then flattening in the fourth as comparisons ease, McComb said: “That point of view hasn’t changed.”
The company is planning for customer orders to be down about 20 percent throughout the rest of the year. And since orders are placed well in advance, McComb said the company would have a limited ability to ship more product during the end-of-year holiday season if business suddenly picked up.
The newly restructured Liz Claiborne has cut jobs, slashed capital spending and signed a deal to have Hong Kong-based Li & Fung Ltd (0494.HK) handle all its sourcing, a move McComb said will boost margins by hundreds of basis points.
It is also introducing a wider array of merchandise at its stores, including many items with lower price tags or more basic styles to appeal to consumers’ value-consciousness.
For example, Juicy Couture, which is popular with younger women, is selling intimates and loungewear, while Lucky, which specializes in jeans, is introducing accessories and solid T-shirts. Kate Spade, known for designer handbags, will launch clothing this fall.
For the 2009 end-of-year holiday season, McComb said the company’s assortments would be a little more “recession-friendly” and will feature more basic items mixed in with trendier ones.
“In general, a little bit more emphasis on bread and butter than jam and honey, but this is in brands that are really jam and honey businesses,” McComb said.
During last year’s fourth quarter, the industry’s toughest holiday shopping season in nearly four decades, the company posted a wider net loss on sales that fell 22 percent from a year earlier.
Liz Claiborne shares ended up 44 cents or 8.9 percent at $5.38 on the New York Stock Exchange, while the Standard & Poor's 500 Index .SPX was down 0.35 percent.
The company’s shares have nearly doubled this year through Tuesday’s close. They ended 2008 at $2.60 after tumbling 86 percent since September when the financial crisis took hold.
Reporting by Martinne Geller; Editing by Phil Berlowitz and Matthew Lewis