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Liz Claiborne to cut costs; inks deal with Li & Fung
12
Aug '11
Liz Claiborne Inc, announced two initiatives in line with the company's plans to reduce debt and aggressively manage costs.

Debt Reduction Efforts

As part of its efforts to de-leverage the company, Liz Claiborne Inc. amended its long-term license agreement with Elizabeth Arden, allowing Elizabeth Arden to acquire the trademarks for the Curve fragrance brands and selected other smaller fragrance brands. The amendment also includes a lower effective royalty rate associated with the fragrance brands that remain under license, including Juicy Couture and Lucky Brand fragrances, reduces the future minimum guaranteed royalties for the term of the license, and requires a pre-payment of certain royalties. In connection with this transaction, Elizabeth Arden paid $58.4 million in cash to Liz Claiborne Inc.

Cost Management Initiative

Liz Claiborne Inc. has entered into an agreement with Li & Fung Limited for distribution in the United States for the company's owned retail stores, as well as for its wholesale business. Upon implementation of this initiative, the company will have significantly reduced its fixed cost base for distribution. Related functions such as logistics and compliance will remain in-house.

Commenting on the announcements, William L. McComb, Chief Executive Officer of Liz Claiborne Inc., said: "On our second quarter earnings call last month we discussed our commitment to meaningfully reducing our debt profile and SG&A costs. As part of the discussion, we acknowledged that we were actively assessing the optionality within our Partnered Brands segment and that we had several irons in the fire - this agreement with Elizabeth Arden being one of those irons. At the heart, this deal is a testament to the successful partnership we have built over the years with Elizabeth Arden. The key benefits to Liz Claiborne Inc. are that it provides a significant cash infusion that we will use to pay down debt, and supports our goal of ending 2011 with lower debt levels than at year end 2010."

Mr. McComb concluded: "We also noted on the call our plan to close our last remaining company-owned distribution center in the United States. This agreement with Li & Fung Limited will allow us this much needed flexibility without sacrificing the service level our customers, our owned retail stores and ultimately our consumers demand."

Liz Claiborne Inc designs and markets a global portfolio of retail-based premium brands including Juicy Couture, kate spade, Lucky Brand and Mexx. The Company also has a refined group of department store-based brands with strong consumer franchises including the Monet family of brands, Kensie, Kensiegirl, Mac & Jac, and the licensed DKNY Jeans and DKNY Active brands.

Liz Claiborne Inc

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