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Liz plans 50% decrease in capital expenditures in 2009
27 Oct '08
5 min read
“Traffic in malls and street locations is off in every region, including Europe. Consumer confidence has clearly been impacted in a way we hadn't seen earlier this year."
"While we have built very solid holiday plans, with strong opening price points and high impact assortments, we are lowering our guidance significantly for the fourth quarter, assuming the cutback in discretionary spending we are seeing right now will last throughout the holiday season, resulting in sales and profitability significantly below our prior expectations.
The resulting fourth quarter adjusted EPS from continuing operations guidance now falls in the range of $0.19 to $0.24 -- from the previous range of $0.66 to $0.71. These new forecasts assume a blended comparable store sales decline in the low double-digits on average in our stores -- with Juicy being the positive exception. This results in a full year 2008 adjusted EPS from continuing operations guidance range of $1.00 to $1.10 compared to our previous estimate of $1.40 to $1.50. If current trends deteriorate further, it may be necessary to revise this adjusted EPS guidance. Given the uncertain environment and our lack of visibility, we will not provide 2009 guidance as part of our third quarter earnings release and conference call which is scheduled for November 11th."
Mr. McComb concluded, "We will continue our intense focus on controlling the controllables ... inventory, accounts receivable, brand execution and generating free cash flow to pay down debt. Our balance sheet remains strong and we continued to drive improvements in working capital in the third quarter, as evidenced by the estimated 24% reduction in inventory and 27% reduction in accounts receivable compared to last year, which reductions include the impact of brands sold, discontinued, or licensed.”
“We expect our seasonally strong fourth quarter cash flow to result in a total debt balance of $750 to $775 million at year end, a reduction of approximately $110 to $135 million in total debt from the end of last year. Based upon these updated projections, for the full year 2008, we expect to generate $300 to $325 million of cash flow from continuing operating activities and also expect to be in compliance with our bank credit facility financial covenants for the 3rd and 4th quarters."
"While we have built very solid holiday plans, with strong opening price points and high impact assortments, we are lowering our guidance significantly for the fourth quarter, assuming the cutback in discretionary spending we are seeing right now will last throughout the holiday season, resulting in sales and profitability significantly below our prior expectations.
The resulting fourth quarter adjusted EPS from continuing operations guidance now falls in the range of $0.19 to $0.24 -- from the previous range of $0.66 to $0.71. These new forecasts assume a blended comparable store sales decline in the low double-digits on average in our stores -- with Juicy being the positive exception. This results in a full year 2008 adjusted EPS from continuing operations guidance range of $1.00 to $1.10 compared to our previous estimate of $1.40 to $1.50. If current trends deteriorate further, it may be necessary to revise this adjusted EPS guidance. Given the uncertain environment and our lack of visibility, we will not provide 2009 guidance as part of our third quarter earnings release and conference call which is scheduled for November 11th."
Mr. McComb concluded, "We will continue our intense focus on controlling the controllables ... inventory, accounts receivable, brand execution and generating free cash flow to pay down debt. Our balance sheet remains strong and we continued to drive improvements in working capital in the third quarter, as evidenced by the estimated 24% reduction in inventory and 27% reduction in accounts receivable compared to last year, which reductions include the impact of brands sold, discontinued, or licensed.”
“We expect our seasonally strong fourth quarter cash flow to result in a total debt balance of $750 to $775 million at year end, a reduction of approximately $110 to $135 million in total debt from the end of last year. Based upon these updated projections, for the full year 2008, we expect to generate $300 to $325 million of cash flow from continuing operating activities and also expect to be in compliance with our bank credit facility financial covenants for the 3rd and 4th quarters."
Liz Claiborne Inc
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