Liz Claiborne generates decrease in inventory of 17%

USA -- Liz Claiborne Inc announced earnings for the first quarter. For the first quarter of 2009 and on a GAAP basis, the loss per share from continuing operations was ($0.93) compared to a loss per share from continuing operations of ($0.08) for the first quarter of 2008. Adjusted loss per share from continuing operations for the first quarter of 2009 was ($0.37) compared to adjusted diluted earnings per share ("EPS") from continuing operations of $0.33 for the first quarter of 2008.

Net sales from continuing operations for the first quarter of 2009 were approximately $780 million, a decrease of $316 million, or 28.8%, from the comparable 2008 period (which had an extra week compared to the current year). Excluding the impact of an $88 million decrease associated with brands or certain brand activities that have been licensed, closed or exited and have not been presented as part of discontinued operations and fluctuations in foreign currency exchange rates, which reduced net sales by $41 million, net sales decreased $187 million, or 17.1%.

The adjusted results for the first quarter of 2009 and 2008 exclude the impact of expenses incurred in connection with the Company's streamlining initiatives and brand-exiting activities and a goodwill impairment charge in 2009. The Company believes that the adjusted results for the first quarter of 2009 and 2008 represent a more meaningful presentation of its historical operations and financial performance since these results provide period to period comparisons that are consistent and more easily understood. The attached tables, captioned "Reconciliation of Non-GAAP Financial Information", provide a full reconciliation of actual results to the adjusted results.

William L. McComb, Chief Executive Officer of Liz Claiborne Inc, said: "As indicated on the March earnings call, our operating performance in the first quarter which represents the seasonal low point of the year was further challenged as consumer spending and mall traffic remained at depressed levels. These factors, coupled with a highly promotional retail environment, resulted in comparable store sales decreases of 22% at Juicy Couture, 18% at Lucky Brand, 27% at Kate Spade and 7% at Mexx, while negatively impacting margins in both our retail and wholesale businesses.

Despite these operating challenges, we continued our exceptional expense, balance sheet and cash flow management in the quarter as we recorded total debt of $754 million, a $235 million decrease compared to the first quarter of 2008, inclusive of an $81 million decrease due to changes in foreign currency exchange rates. We generated a 17% reduction in inventory compared to last year, including the impact of brands sold, discontinued, or licensed.

Cash flow from operating activities was very strong at $401 million for the last twelve months, including the receipt of $126 million in net income tax refunds and $75 million associated with our sourcingagreement with Li & Fung, resulting in availability of $166 million in our bank credit facility at the end of the quarter."

Mr. McComb added, "We successfully closed our sourcing agreement with Li & Fung on March 31st. Our brand teams are currently hard at work, partnering with Li & Fung to drive the operational excellence that we expect to achieve in our sourcing operation. We are pleased with the progress made in the first six weeks of this relationship and continue to expect Li & Fung to play a critical role in collaborating with us to drive meaningful gross margin improvement across our brands, beginning in the Holiday 2009 season.

We are very pleased with market and consumer acceptance of our recently launched Liz Claiborne New York brand and remain optimistic that we will see meaningful operating and financial gains in this business. We also recently announced the hiring of Thomas Grote, formerly of Esprit, as the new CEO for Mexx. Thomas has an impressive background and proven track record of success and we expect that he will accelerate the execution of Mexx's turnaround."

Mr. McComb concluded, "Our outlook for the balance of the year remains unchanged. We expect comp store sales declines in the 15-25% range in our Juicy Couture, Lucky Brand and Kate Spade brands and a high single digit comp store sales decline in our Mexx brand through the third quarter of 2009, with fourth quarter comps flattening as we anniversary the sharp downturn that began in September 2008.

We are projecting an adjusted operating loss for the second quarter -- and although we expect the GAAP loss to be smaller than first quarter, driven by declining restructuring costs, the second quarter sales and adjusted operating loss profile will be similar to what we reported today for the first quarter. By the third quarter, we expect results to improve, primarily driven by the impact of the $70 million in cost reductions announced in February and the positive impact on margin resulting from reduced inventories.

We are also projecting an adjusted operating profit for the fourth quarter. This sales and earnings scenario continues to characterize our thinking. In spite of a more generally optimistic tone in the news and in some industry reports, we see the environment as still fundamentally promotional, with a reserved consumer and significantly reduced traffic."
 
Liz Claiborne Inc