Liz Claiborne reduces total debt to $744 million

05 Mar '09

6 min read

Mr. McComb continued: "Fourth quarter adjusted loss per share from continuing operations was ($0.04), within the pre-announced range provided on January 13th. The operating environment in the fourth quarter was extraordinarily difficult as consumer spending was further impacted by deteriorating economic conditions. As our pre-announcement, our comparable store sales for Juicy Couture, Lucky Brand and Kate Spade were each in the negative mid-teens while Mexx's comps were negative 12%. The highly promotional retail environment also negatively impacted margins in both our retail and wholesale businesses. We demonstrated exceptional balance sheet and cash flow management in the quarter as we paid down $175 million in bank debt, primarily driven by aggressive working capital management."

"We generated a 14% reduction in inventory and a 23% reduction in accounts receivable compared to last year, including the impact of brands sold, discontinued, or licensed. We also ended the year with total debt of $744 million, which is below the $750 to $775 million range we guided on our November 13th earnings call and $144 million less than at year-end 2007."

Mr. McComb added, "We are very excited about last week's announcement that we are broadening our successful sourcing relationship with Li & Fung. Li & Fung has unparalleled global reach and product expertise, making them the perfect partner to make our sourcing operation more efficient while allowing us to deliver high quality, more irresistible product to our retailers and consumers around the world. We expect Li & Fung to play a critical role in collaborating with us to drive gross margin improvement across our brands, beginning in the Holiday 2009 season."

Mr. McComb concluded, "Given the lack of visibility caused by the highly uncertain environment, we are not providing full year 2009 EPS guidance. However, our 2009 plan assumes a retail environment similar to the fourth quarter of 2008, throughout 2009. This would produce comp store declines in the 15-25% range for all brands through the third quarter of 2009, with the fourth quarter reported comp flattening as we anniversary the sharp downturn that began in September 2008".

"In terms of adjusted operating profit, we anticipate a meaningful loss in the first quarter, with improvement in each successive quarter as the $70 million in cost reductions we announced in early February flow through over the balance of this year. This translates into a loss during the first half, and positive reported adjusted operating profit for the second half. In addition to the impact of the cost reductions, this plan assumes modest margin expansion in the second half of the year from improving sell through rates on the Liz Claiborne New York business, as well as adapted assortments, pricing and promotional strategies in all the brands."

"We are planning working capital, marketing, and other expenses assuming this retail trend. We are carefully managing our liquidity position and we are focused on maximizing our availability under our bank credit facility. In February, we received a $90 million federal tax refund and we also expect to receive $75 million in cash upon the closing of the Li & Fung transaction by the end of the first quarter, and will receive an additional $8 million to offset the restructuring expenses associated with the transaction."

Liz Claiborne Inc

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