Liz Claiborne Inc. Q3 Loss Widens as It Exits Brands

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New York—A leaner Liz Claiborne, Inc., which has completed $471 million in transactions since August—including the sale of its namesake brand to JCPenney—reported Wednesday a wider third quarter loss, hurt by the loss of income from those brands.

For the quarter ended Oct. 1, the company, which plans to change its name, reported a net loss of $214.63 million, or $2.27 a share, an increase from the $62.69 million, 67 cents a share loss a year ago. But on an adjusted basis, the company actually posted an unexpected profit.

Excluding costs relating to the sales of its brands, trademark sales and other special items, adjusted net income from continuing operations was 5 cents a share, while analysts’ average estimated expected a loss of 5 cents.

Net sales fell 9.1% to $398.85, from $437 million in the same quarter last year. However, excluding a $31 million decline in net sales of brands that have been licensed or sold off, sales decreased 1.9%, the company said.

Since August, Liz Claiborne sold its Liz Claiborne and Monet brands to JCPenney, its Dana Buchman brand to Kohl’s, and its Kensie brand to Bluestar Alliance, its fragrance brands to Elizabeth Arden and its Mexx brands to a joint venture with The Gores Group. The divestitures will help reduce the more than $548 million in long-term debt the company reported at the end of its second quarter.

As a result of the sell off, net sales at its partnered brands division dropped 42.6%  to $84 million from last year. But the company said sales of its direct brands, which include Lucky Brand, Juicy Couture and kate spade new york, were “in line overall with our expectations.”

Kate Spade Has a Potential to Hit $2 Billion in Sales

Net sales for the direct brands division were up 7.9% to $314 million, reflecting  a 69%  increase at kate spade and a 3% increase at Lucky Brand. Juicy Couture posted a 7.2% drop in sales.

“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, ” William McComb, ceo.

In fact, McComb predicted that the kate spade new york brand is positioned to go global with a total retail sales target “of $2 billion or greater. We already have an e-commerce business that does over $60 million in annual sales,” he noted. “We see that revenue base growing very fast over the next few years, and it will remain a central point of focus.”

Gross profit margins at the company rose to 53.7% from 50%  last year, as it made money from licensing its namesake brand to JCPenney and sold more products at its high-margin direct brands segment.

Looking ahead, the company continues to forecast pro-forma adjusted EBITDA, excluding foreign currency transaction gains or losses, in a range of $80 million to $90 million for fiscal 2011 and in the range of $130 million to $150 million for fiscal 2012.

McComb told analysts in a conference call that the company would continue to design and manufacture jewelry for the Liz Claiborne, Monet and Dana Buchman brands ” on a wholesale basis, while continuing to offer the Trifari and Marvella brands. This group is neither complex nor expensive to operate and represents a high-margin component of the partnered brands world.”

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