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Liz Claiborne net income drops 65 percent in 1st quarter

Liz Claiborne net income drops 65 percent in 1st quarter

Clothing maker Liz Claiborne Inc. said first-quarter earnings tumbled 65 percent, as the United States' department stores cut back on its poorer-performing clothing lines. The company also issued a weak profit outlook that was well below Wall Street's forecasts.
In a conference call with analysts Tuesday, Chief Executive William L. McComb, a former pharmaceutical executive who joined Claiborne last November, said that in recent months department stores, including Macy's and Dillard's, have been putting more demands on clothing makers for increased profitability while at the same time dramatically increasing their own store label offerings, at the expense of their suppliers' brands.
Such changes have resulted in a dramatic cutback in fall orders, particularly in the company's traditional clothing lines such as Liz Claiborne, Sigrid Olsen and Dana Buchman, McComb said.
Federated Department Stores Inc.'s transformation of Macy's as a national department store brand last fall with its 2005 acquisition of May Department Stores Co. has put even more pressure on the company, as private-label brands at Macy's already exceed 80 percent of its sales, McComb noted.
"In the last 60 days, we have seen an acceleration of many of the negative trends which have impacted our department store business over the past few years," McComb told investors.
McComb added that such changes, along with retailers' demands for leaner inventory and faster fashion deliveries, have impacted Claiborne's business model with "greater urgency and intensity than ever before, requiring a sea change in how we operate this wholesale business."
Claiborne reported that net income totaled $16.2 million (euro11.9 million), or 16 cents per share, down from $46.9 million, or 45 cents per share during the same period last year. Adjusted for a restructuring program, earnings were 22 cents per share, compared with the adjusted figure of 60 cents a year ago.
Revenue fell nearly 2 percent to $1.15 billion (euro850 million), from $1.17 billion last year.
Analysts surveyed by Thomson Financial expected net income of 60 cents per share on revenue of $1.25 billion (euro920 million). Analysts typically exclude special one-time charges and gains from their estimates.
The report, issued before markets closed Tuesday, sent shares down $7.72, or 17.3 percent, to close at $37 on the New York Stock Exchange.
Net retail sales grew 15.6 percent to $305 million (euro224.2 million), helped by the recently acquired Kate Spade business, as well as strong results from the company's Juicy Couture and Lucky Brand businesses. Same-store sales, or sales in stores open at least one year, fell 3.5 percent, including an 0.6 percent increase at company-operated specialty stores and a 7.8 percent decrease at company-operated outlet stores. Same-store sales are important because they measure growth from existing properties rather than growth by opening new stores.
To turn its business around, McComb told investors that the company will be reviewing its strategies for aging brands like Claiborne, while expanding its offerings under its most successful names like trendy Juicy Couture and Lucky Brand jeans.
In July, Claiborne plans to host a meeting to unveil its new strategy.
"While Liz Claiborne is taking the right approach to today's retail environment with niche brands, we contend there are still huge chunks of the business that simply can't grow," Morgan Keegan & Co. analyst Brad A. Stephens said in a note to investors.
Claiborne sees adjusted earnings in fiscal 2007 of $1.90 to $2.05 per share, excluding 6 cents in expenses in the first-quarter from a restructuring program as well as other potential charges such as divestitures, acquisitions and stock buybacks.
Analysts surveyed by Thomson Financial expected net income of $3.12 per share.


Updated : 2021-04-19 15:26 GMT+08:00