Liz Claiborne's profit fell 66% in the first quarter of the year, as it faced up to challenges in its domestic wholesale business and higher markdowns.

The women's wear group posted a profit of $16m or 1.4% of net sales, down from $47m, or 4.0% of net sales, in the first quarter of 2006. Diluted earnings per share slipped 64.4% to $0.16 for the first quarter 2007 compared to diluted EPS of $0.45 for the first quarter 2006.

Operating income in the first quarter was $39m, or 3.4% of net sales, compared to $77m, or 6.6% of net sales, during the first quarter 2006 period.

The company, whose brands include Juicy Couture, Ellen Tracy, Dana Buchman and Kate Spade, said net sales for the first quarter 2007 were $1.153bn, a decrease of 1.6% from the comparable 2006 period.

Liz Claiborne CEO William McComb said: "Clearly, we wish we could have reported better first quarter earnings and provided a stronger outlook for the year. Our first quarter results reflect significant challenges in our domestic wholesale business, partially offset by improved direct to consumer performance.

"Results were driven by lower than anticipated domestic wholesale re-orders, higher levels of markdowns across the domestic wholesale channel and changes in the retail calendar that shifted some shipments into the second quarter.

"Beyond these first quarter results, we have seen an acceleration of many of the negative trends that have impacted our wholesale business over the past few years, resulting in autumn orders that are substantially below those levels originally discussed with several of our major retail partners."

He added that due to this increasing pressure in the domestic wholesale business, it expected a significant shortfall in projected 2007 earnings compared with internal plans and last year's results.

The company reported retail sales growth in the mid-teens for the quarter, reflecting strong results from its Juicy Couture and Lucky Brand businesses.

McComb concluded: "It is clear that these projected results mark a sea change in how we must run our wholesale business. We must evolve our operating platform to deal with near-term challenges and achieve sustainable growth.

"We expect to build on our strengths, particularly our high-potential brands and rapidly growing retail segment. The actions we are taking are aimed at building the business not for one quarter but for the long haul."