Women's wear marketer Liz Claiborne has entered into a ten-year licensing deal for its flagship brands with department store retailer JC Penney, in a bid to return to wholesale profit.

In a bold new merchandising model, the company also announced plans exit the department store channel for its Liz Claiborne New York brand.

In steps to "significantly alter" earnings, all the company's Liz Claiborne and Claiborne branded merchandise in the US and Puerto Rico will now be sold by JCPenney. Liz Claiborne retains the rights to market and distribute the labels outside of the US.

Liz Claiborne chief executive officer William L McComb said: "After two very successful years partnering with JCPenney, we decided it was time to take it to the next level."

While Liz Claiborne will lead the design process, JCPenney will be responsible for sourcing, production, marketing and distribution. They will merchandise the brand together through the deal, which starts next August.

Through the agreement Liz Claiborne will receive design service fees and royalties as a percent of sales plus gross profit sharing with guaranteed minimums.

Meanwhile, the Liz Claiborne New York brand, designed by Isaac Mizrahi, will be distributed through a new deal with shopping channel QVC.

The company, whose other brands include Juicy Couture, Kate Spade, Lucky Brand Jeans and Mexx, is looking to stem declining sales in a challenging US retail environment. It follows a corporate restructuring plan first announced in 2007.

Profit goal
The JC Penney deal, which leaves rivals Macy's and Dillard's out in the cold, should provide a more predictable revenue and earnings model via a licensing fee, and passes on the merchandising and sourcing reposibilities to its retail partners.

Indeed, as a result of the agreements, Liz Claiborne projects wholesale brand franchise to swing from a meaningful adjusted operating loss in 2009 to a targeted adjusted operating profit in 2010.

McComb added in a company webcast: "We did not do this deal for just the minimums, and nor is JC Penney planning to them.

"This partnership with JC Penney is already a proven one, since launching Liz & Co and Concepts by Claiborne in 2007 they have become a very important part of the business."

Myron E (Mike) Ullman, III, chairman and chief executive officer of JCPenney said: "In capitalising on each of our strengths, this agreement brings huge benefits to both companies by giving our customers a substantially expanded Liz Claiborne offering at a more accessible price point than ever before."

Marie Driscoll, equity analyst at Standard & Poor's, said in a research note: "The Liz brand has been crowded out (and losing money) at better retailers.

"We look for a return to profitability in the next 12 months. We are widening our 2009 estimate to a $1.00 loss from a $0.65 loss, and raising our 2010 estimate to $0.55 EPS from $0.05."

Dow Jones noted that Liz Claiborne shares rallied 15% on the New York Stock Exchange after yesterday's (8 October) news.