US: Liz Claiborne reaffirms FY despite wider Q3 loss
- Q3 net loss widened to $215m
- Swung to $2m profit from continuing operations
- Sales for the quarter fell 9.1% to $398m
Apparel seller Liz Claiborne Inc, which in recent months has sold several under-performing brands including Mexx and its namesake Liz Claiborne line, has reaffirmed its full-year targets despite seeing its third quarter loss widen.
The firm, which says it has generated $471m from the brand sales and other transactions since August, saw its net loss widen to $215m or $2.27 per share in the three months to 1 October, from a loss of $63m or $0.67 per share, in the same period last year.
But it posted a profit from continuing operations of $2m or $0.02 per share, compared to a loss of $42m or $0.45 per share, a year ago.
Net sales for the quarter fell 9.1% to $398m. But again, the picture was brighter when $31m in net sales of brands that have been licensed or exited are excluded from the numbers - giving a 1.9% drop in net sales.
"Since our mid-October Partnered Brands sale announcement, we have successfully completed the Mexx, Liz Claiborne, Monet, Dana Buchman and Kensie transactions," said CEO William McComb.
"We are now a more efficient, dynamic, brand-centric, retail-based company and will focus on building and growing our three global lifestyle brands - Juicy Couture, Lucky Brand and Kate Spade."
During the quarter, sales of these three domestic retail-based brands rose 7.9% to $313m, with Kate Spade sales jumping 69.0% to $75m, and Lucky Brand up 3.0% to $101m but Juicy Couture sales slipping 7.2% to $137m.
The segment swung to an operating loss of $2m in the quarter, from an operating income of $5m in the same period last year.
In the partnered brands segment, which includes the wholesale, licensing, concession and e-commerce operations of the Liz Claiborne, Monet, Dana Buchman, Kensie, Mac & Jac, and licensed DKNY brands, sales slumped 42.6% to $84m.
This was mainly due to a fall in Axcess and Liz Claiborne brand sales which transitioned to licensing models under arrangements with JCPenney and QVC, and lower sales of the licensed DKNY Jeans brand.
Operating loss in this segment widened to $7m from $3m, but the growth of its licensing model and higher sales of its domestic-based direct brands helped lift total company gross profit rate to 53.7% of net sales, up from 50.0% in the third quarter last year.
Heading into the Holiday season, the company said October same-store sales were "in line overall with our expectations," with Kate Spade rising 54% and Lucky Brand up 23%. But again Juicy Couture came in below par, with comps falling 13%.
Although, McComb pointed out: "We remain excited about renewed growth, based upon early reviews of the new team's product, which is already in the pipeline and will ship in the first quarter of 2012."
Looking ahead, he added: "We continue to forecast pro-forma adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), excluding foreign currency transaction gains or losses, in the range of $80m to $90m for fiscal 2011 and expect year end net debt to be in the range of $270m to $290m.
"For fiscal 2012, we continue to forecast adjusted EBITDA, excluding foreign currency transaction gains or losses, in the range of $130m to $150m."
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