Progress At Liz Claiborne Defended By CEO McComb

by Lisa Lockwood
From WWD Issue 05/20/2011

Despite criticism from some shareholders, William L. McComb, chief executive officer of Liz Claiborne Inc., insisted the company was making progress on several fronts at the firm’s annual shareholders’ meeting Thursday morning.

“The fruits of our labors in restructuring the company have begun to show in a few meaningful areas,” McComb told shareholders, who gathered at the company’s 1441 Broadway headquarters. He cited the relaunch of the Liz Claiborne brand as an exclusive line for J.C. Penney Co. Inc. “It’s already proven to be profitable,” he said, and Penney’s has committed floor space and marketing to the brand. “The Liz Claiborne franchise is well on its way to achieve [Myron E.] ‘Mike’ Ullman’s [Penney’s chairman and chief executive officer] $1 billion sales goal,” said McComb, during the 20-minute meeting.

Based on channel, product and cost initiatives, McComb said he expects the partnered brands’ portfolio to be profitable in 2011. McComb said the Dana Buchman license with Kohl’s Corp. “is larger and more profitable than the previous rendition” of the Dana Buchman brand in 2006 in traditional higher-end department stores. He also noted that Claiborne has completely overhauled the Kate Spade business, which five years ago was a struggling brand “unable to execute.”

“The results are very strong. [Kate Spade] is an extremely profitable and high-growth business, with seemingly unlimited global potential,” said McComb of the brand, which generated $184.3 million in sales last year. Late Wednesday, Kate Spade said it had formed a major venture in Mainland China with the E. Land Group, with plans to grow to nearly 300 points of distribution by 2020.

As for some of the problem areas, he said, “the acceleration at Lucky Brand has been bumpier.” He pointed out that in the past year, the company has made major strides, and the brand is experiencing “solid, positive comp-door growth in our retail stores since mid-January,” a trend he expects to continue throughout the year.

He then addressed Juicy Couture, which is the company’s most profitable brand. Now predominantly a retail-based business domestically, he said the brand is in the midst of refreshing the product, marketing and stores. “We’re undergoing the same kind of internal transformation now with Juicy that we implemented two years ago at Kate Spade, and we could not have found a better person, LeAnn Nealz, our new creative director, to lead the charge.”

Finally, McComb turned to Mexx Europe. Although the retail division is still losing money and is undergoing major restructuring, he said through the fall, the wholesale division will have posted a full year of double-digit increases in bookings. “We continue to pursue our goal of break-even operating profit for the global brand by the end of 2012, and our ability to achieve this goal will significantly impact the total profit picture of the corporation,” he said.

For the year, Claiborne narrowed its loss to $251.5 million from $305.7 million. Revenues dropped 14.3 percent to $2.5 billion from $2.92 billion.

As part of the agenda, one stockholder, Kenneth Steiner, proposed shareholder action by written consent, in lieu of a meeting. Steiner took the opportunity to air some complaints about the company. He said Claiborne has seven directors who have been there since before 2006 and are “overseeing the disastrous collapse of the company.” He said “sales are way down, the company has had three losses in a row, and even the first quarter was a very poor one.

“We have extreme overcompensation of you, the ceo, making millions and millions of dollars, while shareholders like I have lost over 90 percent on this stock. That’s ridiculous,” said Steiner. “The stock has completely collapsed. Someone has to be held accountable, but the directors don’t want to hold themselves accountable, nor the ceo. It’s now the shareholders’ responsibility to do so,” said Steiner. Although the company did not support the proposal, it was passed.

During the question-and-answer period, one shareholder said she was in the Juicy Couture store on Madison Avenue and “it’s just blah now. There’s nothing special about it. The clothing, the colors...”

McComb said the store is largely focused on Bird, an elevated brand targeting the 35- to 45-year-old woman. She then asked why Juicy got rid of its founders, Pamela Skaist-Levy and Gela Nash-Taylor, and McComb said their contract had ended. “That was always planned. They were owners and they moved onto other things.”

Liz Claiborne Pressured to Sell Assets

by Evan Clark
From WWD Issue 04/29/2011

Wall Street is pushing William L. McComb, chief executive officer of Liz Claiborne Inc., to sell something — be it Kate Spade, Liz Claiborne, Mexx or a wholesale business.

And he just might. McComb’s spent four years structuring the company so its businesses, including Kate Spade, Lucky Brand and Juicy Couture, were “cleavable”— but said the timing is not yet right.

At the company’s investor conference in New York Thursday, McComb was pressured to unlock some of the value in the relatively small but fast-growing Kate Spade business, which many see as the most promising piece of Claiborne’s portfolio.

A conference attendee asked McComb: “What is stopping the company from highlighting some portion of that value [in Kate Spade], whether it’s a small portion of a sub-[initial public offering], spinning to shareholders, something like that so everybody can benefit? People need to understand there’s a lot of operational risk in this strategy and the more you wait the more risk you take.”

McComb quipped that it was more of a statement than a question, but went on to say, “It’s something that we look at and we talk about and we consider. If we felt it was wobbly we might take advantage of it right now. But I think a year from now you might thank us for holding off and doing it a year from now. I’m not saying it’s a 10-year project. I’m not saying it’s a five-year project.”

On Mexx, Claiborne’s largest and most troubled business, McComb said the company was looking at options to “de-risk,” perhaps through a joint-venture ownership structure that would move the business outside the U.S. public company.

On a conference call Wednesday afternoon, an analyst asked if J.C. Penney Co. Inc. might buy the Liz Claiborne brand this year, speeding up the timetable for a potential sale envisioned in Claiborne’s licensing deal with the retailer. “I’ve had a lot of people ask that question,” McComb said, leaving it open as a possibility.

If the company were to sell off a business it would be able to shrug off some of its financial obligations — it has $133.5 million in borrowings coming due over the next year and more than $500 million in long-term debt.

Liz Claiborne Posts Losses for Q1

by Evan Clark
From WWD Issue 04/28/2011

Liz Claiborne Inc.’s first-quarter losses widened as sales slipped and the Juicy Couture brand continued to struggle.

And the Mexx business is going to be trimmed back some to help the bottom line.

Chief executive officer William L. McComb told analysts, “We continue to make decisions based on the operating goal of breaking even in the global Mexx business in 2012 and that now includes making selective store closures where required in the retail side of the business to achieve that.”

McComb and other Claiborne executives will flesh out the company’s outlook at an investor conference today.

Net losses attributable to the firm expanded to $96.3 million, or $1.02 a diluted share, from $71.8 million, or 76 cents, a year earlier. The adjusted loss per share from continuing operations tallied 56 cents, worse than the 31 cent deficit analysts expected.

Sales for the three months ended April 2 fell 12.1 percent to $513.2 million from $584.2 million. On a divisional level, Kate Spade was the standout with first-quarter sales up 71.7 percent to $59 million from a year earlier. The rest of the company’s businesses saw sales declines with Juicy down 1.2 percent to $115 million, Mexx off 8.9 percent to $165 million, and Lucky Brand declining 8.9 percent to $84 million.

The challenges at Juicy are expected to continue, but McComb said course corrections made by Leann Nealz, the brand’s president and creative director, would have a positive impact on the holiday season.

“The Juicy woman still loves the Juicy brand,” McComb said. “Our execution has been stale. What gives me a lot of encouragement is the innovation and change that [Nealz’s] team has brought to the table starting holiday.”

Shares of Claiborne rose 3.6 percent, or up 23 cents, to $6.55 in trading on the New York Stock Exchange prior to the aftermarket report.

Liz Claiborne Projects Adjusted EBITDA Loss for Quarter

By Evan Clark
From WWD Issue 03/29/2011

Liz Claiborne Inc. said its Kate Spade brand continued to shine in February with an 87 percent gain in comparable-store sales, but the overall company is projected to post adjusted first-quarter losses of $11 million to $17 million before interest, taxes, depreciation and amortization.

Comps at Lucky Brand also rose in February, perking up 12 percent, but the firm’s other direct-to-consumer businesses saw declines. Juicy Couture comped down 5 percent, while Mexx Europe slid 8 percent and Mexx Canada dipped 3 percent. Claiborne includes e-commerce in its comp totals.

The company continues to expect adjusted EBITDA to rise to between $100 million and $120 million for 2011 from $50 million last year.

Claiborne had net losses of about $150 million last year and has been working to refinance its debt.

On Monday, the company said it intended to sell up to $200 million in senior secured notes due 2019. The proceeds would be used to fund a previously disclosed tender offer to acquire up to 155 million euros, or $218 million at current exchange, of its 5-percent euro notes.

Claiborne had been planning to hold an investor day Thursday, but pushed it back to April 28 in light of the refinancing.

Moody’s Investors Service assigned the new notes a rating of “B2” and affirmed the firm’s “B3” corporate family rating and the “Caa2” rating on the euro notes.

“Liz’s ‘B3’ corporate family rating reflects the company’s weak credit metrics, its recent sizable operating losses, and the persistent weakness of its Mexx brand,” Moody’s said. “The rating also reflects the company’s overall good liquidity and lack of near-term debt maturities.”

The debt watchdog also said it expected the company’s performance to “begin to show meaningful improvement over the remainder of 2011 as a result of initiatives such as the change in its distribution strategy for its Liz Claiborne brand family and initiatives of new management teams to execute recovery at certain segments, notably Mexx and Lucky Brand Jeans.”

The Liz Claiborne brand is sold at J.C. Penney under a 2009 licensing agreement.

The company’s shares Monday closed at $5.22, down 24 cents, or 4.4 percent.