Liz Claiborne Q2 Loss Widens, But Sales Beat Forecasts

New York–Liz Claiborne Inc. said Thursday that its second-quarter net loss widened as expenses rose, but sales, especially in its Kate Spade brand, rose beating expectations.

For the quarter ended July 2, Liz Claiborne posted a net loss of $89.9 million, or 95 cents per share, compared with $86.8 million, or 92 cents per share, in the year-ago quarter. Much of the loss could be attributed to the company’s selling, general and administrative expenses which climbed 6% to $359.7 million and foreign exchange impacts. Excluding impairment charges and other items, the loss from continuing operations widened to 34 cents from 16 cents.

Emphasis on International, Juicy Couture, Kate Spade

Meanwhile, revenue rose 4% to $555.8 million. While the earnings met analysts’ average estimate which expected a 32 cents a share loss, total sales beat analysts’ expectations for $522.1 million in sales.

Liz Claiborne, which has now reported 15 straight quarters of losses, has been rebuilding its brand portfolio with more emphasis on its direct brands, such as Kate Spade and Juicy Couture.

Revenue from its domestic-based direct brands unit rose 18% to $282 million, with sales from its Juicy Couture brand rising 5% to $117 million, Lucky Brand rising nearly 13% to $97 million and Kate Spade jumping 64% to $68 million. But operating loss in this division widened to $24 million from $13 million.

Gross margin widened 51.9% from 49.6% on an improved gross profit in its partnered brands segment, which includes the Liz Claiborne, Dana Buchman and DKNY license. The partnered brands division, however, saw sales drop 30.6% to $93 million. This was blamed on changes in licensing agreements with JCPenney and QVC, as well as moves to license out or exit several brands. The division’s operating losses narrowed to $17 million from $37 million in second quarter 2010.

In the international-based direct bands unit, sales rose 10.8% to $180 million with increase at both Mexx Europe wholesale and Mexx Canada retail businesses partially offset by a drop in Mexx Europe retail. Operating losses widened to $25 million from $24 million.

“We also continue to see positive momentum at JCPenney on the Liz Claiborne brand across their stores,” said William L. McComb, ceo, said.  “The creative direction of Juicy Couture is now well on track, foreshadowing an expected improved trend in fourth quarter and a return to positive comp growth in 2012. Our focus on international expansion is in full force at both Kate Spade and Juicy Couture, where we have made important progress during the quarter.”

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