Liz Claiborne Inc. News
Liz Claiborne Inc. Reports 1st Quarter Results
The first quarter 2008 results on an adjusted basis exclude the impact of expenses incurred in connection with the Company's streamlining activities, the loss on disposal of discontinued operations and the results of discontinued operations. The first quarter 2007 results on an adjusted basis exclude the impact of expenses incurred in connection with the Company's streamlining activities and the results of discontinued operations.
The Company believes that the adjusted results for the first quarter of 2007 and 2008 and the adjusted projected results for fiscal 2008 represent a more meaningful presentation of its historical and estimated operations and financial performance since these results provide period to period comparisons that are consistent and more easily understood. The attached tables, captioned "Reconciliation of Non-GAAP Financial Information", provide a full reconciliation of actual results to the adjusted results.
Mr. McComb added, "No question the difficult economic environment has lowered visibility into our future financial performance and presented new challenges for us, our retail partners and consumers both in the U.S. and
Mr. McComb continued, "In this environment, we will continue to focus on disciplined execution of our strategy while improving operating margins in the near term in both our Direct and Partnered Brands segments with an emphasis on rigorous management of expenses, inventories and cash flow, while continuing to bring new talent into the Company and build key operating capabilities."
Mr. McComb concluded, "Our business plan called for earnings significantly weighted toward the second half, as in years past, with the weakest earnings for the year planned in the second quarter. Despite our strong first quarter performance, we are projecting weak earnings in the second quarter as we expect to be negatively impacted by a calendar shift compared to the second quarter of 2007, weak sales trends in our Mexx Europe business prior to the introduction of improved Fall 2008 product and significant discounting by department store and mid-tier retailers in
The Company will sponsor a conference call today at
OPERATING SUMMARY — In the second quarter of 2007, the Company revised its segment reporting structure to reflect the strategic realignment of its businesses, reflecting a brand-focused approach. The prior period has been conformed to the current period's presentation. The Company has aggregated its brand-based activities into two reporting segments as follows: - The Direct Brands segment - consists of the specialty retail, outlet, wholesale apparel, wholesale non-apparel (including accessories, jewelry, handbags and fragrances), e-commerce and licensing operations of the Company's four retail-based brands: Mexx, Juicy Couture, Lucky Brand and Kate Spade. - The Partnered Brands segment - consists of the wholesale apparel, wholesale non-apparel, outlet, specialty retail, e-commerce and licensing operations for the Company's owned and licensed wholesale- based brands, including the Company's non-Direct Brand fragrances. The results of its Emma James, Intuitions, J.H. Collectibles, Tapemeasure, C&C California, Laundry by Design and Prana brands and the retail operations of the Ellen Tracy brand are shown as discontinued operations. — Net sales in the first quarter (which had an extra week as compared to the prior year) increased 4.9% to $1.122 billion. The impact of changes in foreign currency exchange rates in our international businesses increased net sales by approximately $52 million, or 4.9%, during the quarter. Net sales in the quarter were also positively impacted by the inclusion of a 14th week and a shift in the calendar compared to the first quarter of 2007. Net sales for our segments are provided below: - Direct Brands segment net sales increased 28.2% in the first quarter to $620 million. - Partnered Brands segment net sales decreased 14.4% in the first quarter to $501 million. — Net sales for our Direct Brands segment in the first quarter were as follows: - Mexx - $342 million, a 20.3% increase compared to last year. Excluding the impact of changes in foreign currency exchange rates, net sales for Mexx were $298 million, a 4.6% increase compared to last year. - Lucky Brand - $110 million, a 21.1% increase compared to last year. - Juicy Couture - $140 million, a 57.5% increase compared to last year. - Kate Spade - $28 million, a 44.0% increase compared to last year. — Operating loss in the first quarter was ($24) million ((2.1)% of net sales) compared to an operating profit of $30 million (2.8% of net sales) in 2007. Adjusted operating income in the first quarter was $42 million (3.8% of adjusted net sales) compared to $40 million (3.8% of adjusted net sales) in 2007. Operating income for our business segments are provided below: - Direct Brands segment operating income in the first quarter was $27 million (4.4% of net sales), compared to $50 million (10.3% of net sales) in 2007. Direct Brands segment adjusted operating income in the first quarter was $39 million (6.3% of net sales) compared to $50 million (10.3% of net sales) in 2007. - Partnered Brands segment operating loss in the first quarter was ($51) million ((10.2)% of net sales), compared to an operating loss of ($20) million ((3.5)% of net sales) in 2007. Partnered Brands segment adjusted operating income in the first quarter was $2 million (0.5% of adjusted net sales) compared to an adjusted operating loss of ($10) million ((1.8)% of adjusted net sales) in 2007. — Expenses associated with our streamlining initiatives were $66 million in the first quarter of 2008 compared to $10 million in the first quarter of 2007. — Inventories decreased 18.3% to $526 million compared to 2007, primarily reflecting decreases in our Partnered Brands segment, including the impact of brands sold, discontinued, or held for sale, partially offset by increases in our Direct Brands segment and our Liz & Co. and Concepts brands. The impact of changes in foreign currency exchange rates increased inventories by $26 million, or 4.1%, in the first quarter of 2008 compared to the first quarter of 2007. — Cash flow from operating activities for the last twelve months was $316 million. — We ended the quarter with $111 million in cash and marketable securities and with $989 million of debt outstanding. Our total debt to total capital ratio was 40.3% in the first quarter compared to 25.7% in 2007, primarily reflecting the impact of the 2007 goodwill impairment in addition to share repurchases, capital expenditures and acquisition- related payments over the last 12 months. FIRST QUARTER RESULTS
Overall Results
Net sales for the quarter increased 4.9% to
Gross profit as a percent of net sales was 47.3% in 2008 compared to 46.7% in the first quarter of 2007, principally reflecting an increased proportion of sales from our Direct Brands segment, which runs at a higher gross profit rate than the company average, partially offset by decreased gross profit rates in our Direct and Partnered Brands segments.
Selling, General & Administrative expenses ("SG&A") were
— a $44 million year over year increase in expenses associated with our streamlining and brand-exiting activities; — a $28 million increase due to the impact of changes in foreign exchange rates in our international operations; — a $22 million increase associated with retail expansion in our Direct Brands segment; — a $15 million increase in Direct Brands SG&A; — the inclusion of $11 million of expenses associated with our Narciso Rodriguez brand (which was acquired in May 2007) and the addition of our licensed Usher fragrance; — the inclusion of $8 million in charges related to the disposal of Ellen Tracy; and — a ($42) million decrease in Partnered Brands and corporate SG&A.
Operating loss was
Income taxes in the first quarter of 2008 decreased by
Loss from Continuing Operations in the first quarter of 2008 was
Net loss in the first quarter of 2008 was
Segment Highlights
Direct Brands
Net sales in our Direct Brands segment in the first quarter were
Net sales for Mexx were $342 million, a 20.3% increase compared to 2007. Excluding the impact of changes in foreign currency exchange rates, net sales for Mexx were $298 million, a 4.6% increase compared to last year, primarily due to the impact of the extra week in the quarter. — We ended the quarter with 134 specialty stores, 90 outlets and 292 concessions, reflecting the net addition over the last 12 months of 4 specialty stores and 8 outlet stores and the net closure of 9 concessions; — Average retail square footage in the first quarter was approximately 1.387 million square feet, a 7% increase compared to 2007; — Sales per square foot for comparable stores over the latest twelve months was $441; and — Comparable store sales decreased 13% in the first quarter, reflecting comparable store sales decreases in our Mexx Europe and Mexx Canada businesses. Net sales for Lucky Brand were $110 million, a 21.1% increase compared to 2007, primarily driven by increases in retail, wholesale apparel and wholesale non-apparel. — We ended the quarter with 173 specialty stores and 20 outlet stores, reflecting the net addition over the last 12 months of 35 specialty stores and 13 outlet stores; — Average retail square footage in the first quarter was approximately 461 thousand square feet, a 38% increase compared to 2007; — Sales per square foot for comparable stores over the latest twelve months was $619; and — Comparable store sales decreased 5% in the first quarter. Net sales for Juicy Couture were $140 million, a 57.5% increase compared to 2007, primarily driven by increases in retail and wholesale non-apparel (including fragrance). — We ended the quarter with 40 specialty stores and 18 outlet stores, reflecting the net addition over the last 12 months of 18 specialty stores and 7 outlet stores; — Average retail square footage in the first quarter was approximately 169 thousand square feet, a 101% increase compared to 2007; — Sales per square foot for comparable stores over the latest twelve months was $1,366; and — Comparable store sales increased 16% in the first quarter. Net sales for Kate Spade were $28 million, a 44.0% increase compared to 2007, primarily driven by increases in retail and wholesale non-apparel. — We ended the quarter with 26 specialty stores and 16 outlet stores, reflecting the net addition over the last 12 months of 6 specialty stores and 12 outlet stores; — Average retail square footage in the first quarter was approximately 87 thousand square feet, a 68% increase compared to 2007; — Sales per square foot for comparable stores over the latest twelve months was $676; and — Comparable store sales decreased 2% in the first quarter.
Direct Brands segment operating income in the first quarter was
Partnered Brands
Net sales in our Partnered Brands segment in the first quarter were
— The $84 million decrease in net sales in our Partnered Brands segment was primarily due to decreases in our Liz Claiborne, Dana Buchman, Ellen Tracy, Enyce and Claiborne brands, partially offset by increases in our Liz & Co., licensed DKNY Jeans and Kensie brands and the launch of our licensed Usher fragrance.
Partnered Brands segment operating loss in the first quarter was
About Liz Claiborne Inc.
Liz Claiborne Inc. designs and markets a global portfolio of retail-based premium brands including
Forward-Looking Statement
Statements contained herein that relate to future events or the Company's future performance, including, without limitation, statements with respect to the Company's anticipated results of operations or level of business for 2008 or any other future period, are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on current expectations only and are not guarantees of future performance, and are subject to certain risks, uncertainties and assumptions. The Company may change its intentions, belief or expectations at any time and without notice, based upon any change in the Company's assumptions or otherwise. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. In addition, some factors are beyond the Company's control. Among the factors that could cause actual results to materially differ include: risks associated with the current macroeconomic conditions, including the possibility of a recession in
The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
CONSOLIDATED STATEMENTS OF OPERATIONS (All amounts in thousands, except per common share data) (Unaudited) Three Months Three Months Ended Ended April 5, 2008 % of March 31, 2007 % of (14 weeks) Sales (13 weeks) Sales Net Sales $1,121,542 100.0 % $1,069,200 100.0 % Cost of goods sold 590,615 52.7 % 570,092 53.3 % Gross Profit 530,927 47.3 % 499,108 46.7 % Selling, general & administrative expenses 554,904 49.5 % 469,378 43.9 % Operating (Loss) Income (23,977) (2.1)% 29,730 2.8 % Other expense, net (2,748) (0.2)% (729) (0.1)% Interest expense, net (12,103) (1.1)% (8,532) (0.8)% (Loss) Income before (Benefit) Provision for Income Taxes (38,828) (3.5)% 20,469 1.9 % (Benefit) provision for income taxes (23,984) (2.1)% 9,987 0.9 % (Loss) Income from Continuing Operations (14,844) (1.3)% 10,482 1.0 % (Loss) income from discontinued operations, net of tax (3,975) 5,716 Loss on disposal of discontinued operations, net of tax (12,202) - Net (Loss) Income $(31,021) $16,198 Earnings per Share: Basic (Loss) Income from Continuing Operations $(0.16) $0.10 (Loss) income from discontinued operations (0.04) 0.06 Loss on disposal of discontinued operations (0.13) - Net (Loss) Income $(0.33) $0.16 Diluted (Loss) Income from Continuing Operations $(0.16) $0.10 (Loss) income from discontinued operations (0.04) 0.06 Loss on disposal of discontinued operations (0.13) - Net (Loss) Income $(0.33) $0.16 Weighted Average Shares, Basic (1) 93,507 101,796 Weighted Average Shares, Diluted (1) 93,507 103,127 Supplemental Information: Dividends Paid per Common Share (Rounded to the nearest penny) $0.06 $0.06 (1) Because the Company incurred a loss from continuing operations in 2008, all outstanding stock options and restricted shares are antidilutive. Accordingly, basic and diluted weighted average shares outstanding are equal for such period. LIZ CLAIBORNE INC. CONSOLIDATED BALANCE SHEETS (All dollar amounts in thousands) (Unaudited) April 5, 2008 March 31, 2007 Assets Current Assets: Cash and cash equivalents $111,142 $96,504 Marketable securities 295 9,485 Accounts receivable - trade, net 566,656 601,294 Inventories, net 526,052 644,180 Deferred income taxes 99,506 73,290 Other current assets 287,205 151,383 Assets held for sale 31,227 - Total current assets 1,622,083 1,576,136 Property and Equipment, net 587,404 567,105 Goodwill and Intangibles, net 993,177 1,420,135 Other Assets 43,653 21,570 Total Assets $3,246,317 $3,584,946 Liabilities and Stockholders' Equity Current Liabilities $753,784 $549,935 Long-Term Debt 912,025 715,950 Other Non-Current Liabilities 109,885 102,227 Deferred Income Taxes 1,157 65,445 Minority Interest 3,858 3,375 Stockholders' Equity 1,465,608 2,148,014 Total Liabilities and Stockholders' Equity $3,246,317 $3,584,946 LIZ CLAIBORNE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (All dollar amounts in thousands) (Unaudited) Three Months Ended April 5, 2008 March 31, 2007 (14 Weeks) (13 Weeks) Cash Flows from Operating Activities: Net (loss) income $(31,021) $16,198 Adjustments to arrive at (loss) income from continuing operations 16,177 (5,716) (Loss) income from continuing operations (14,844) 10,482 Adjustments to reconcile (loss) income from continuing operations to net cash used in operating activities: Depreciation and amortization 40,860 37,512 Streamlining initiatives; asset write-down 2,707 4,692 Loss on asset disposals 14,152 - Share-based compensation 3,391 7,535 Tax benefit on exercise of stock options 7 2,074 Other, net 17 (329) Changes in assets and liabilities, exclusive of acquisitions: Increase in accounts receivable - trade, net (117,060) (100,555) Decrease (increase) in inventories, net 8,791 (48,698) Decrease (increase) in other current and non-current assets 47,038 (22,622) Increase (decrease) in accounts payable 1,911 (30,860) Decrease in accrued expenses (49,697) (56,448) Decrease in deferred income taxes and income taxes payable (87,582) (5,831) Net cash (used in) provided by operating activities of discontinued operations (4,043) 6,867 Net cash used in operating activities (154,352) (196,181) Cash Flows from Investing Activities: Purchases of property and equipment (46,105) (34,193) Proceeds from sales of property and equipment - 1,410 Purchases of new businesses and payment of related debt (5,066) (13,431) Payments for in-store merchandise shops (1,632) (924) Other, net (392) (652) Net cash provided by (used in) investing activities of discontinued operations 60,344 (238) Net cash provided by (used in) investing activities 7,149 (48,028) LIZ CLAIBORNE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) (All dollar amounts in thousands) (Unaudited) Three Months Ended April 5, 2008 March 31, 2007 (14 Weeks) (13 Weeks) Cash Flows from Financing Activities: Short term borrowings, net 61,698 4,531 Principal payments under capital lease obligations (1,075) (1,756) Commercial paper, net - 142,355 Proceeds from exercise of common stock options 51 15,976 Dividends paid (5,257) (5,726) Tax (deficiency) excess benefit related to share-based compensation (2,058) 1,091 Other, net (798) (330) Net cash provided by financing activities 52,561 156,141 Effect of exchange rate changes on cash and cash equivalents 383 (1,073) Net Change in Cash and Cash Equivalents (94,259) (89,141) Cash and Cash Equivalents at Beginning of Period 205,401 185,645 Cash and Cash Equivalents at End of Period $111,142 $96,504 LIZ CLAIBORNE INC. RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION (All amounts in thousands, except per common share data) (Unaudited) The following tables provide reconciliations of (Loss) Income from Continuing Operations to Income from Continuing Operations Excluding Streamlining Initiatives and of Operating (Loss) Income to Income from Continuing Operations Excluding Streamlining Initiatives. Three Months Ended April 5, March 31, 2008 2007 (14 weeks) (13 weeks) (Loss) Income from Continuing Operations $(14,844) $10,482 Streamlining initiatives (1) 65,638 10,147 Provision for income taxes (24,931) (3,653) Income from Continuing Operations Excluding Streamlining Initiatives $25,863 $16,976 Operating (Loss) Income $(23,977) $29,730 Streamlining initiatives (1) 65,638 10,147 Operating Income Excluding Streamlining Initiatives 41,661 39,877 Interest expense, net 12,103 8,532 Other expense, net 2,748 729 Provision for income taxes (947) (13,640) Income from Continuing Operations Excluding Streamlining Initiatives $25,863 $16,976 Basic Earnings per Common Share from Continuing Operations Excluding Streamlining Initiatives $0.28 $0.17 Diluted Earnings per Common Share from Continuing Operations Excluding Streamlining Initiatives (2) $0.28 $0.16 (1) The Company announced its streamlining initiatives in February 2006, October 2006 and July 2007. In the three months ended April 5, 2008, the Company recorded expenses of $42.4 million related to payroll, lease terminations and asset write-downs, and losses of $23.2 million related to store closures (aggregating $40.7 million after tax, or $0.44 per share). In the 13 weeks ended March 31, 2007, the Company recorded expenses related to its streamlining initiatives of $10.1 million (aggregating $6.5 million after tax, or $0.06 per share). (2) Amounts for the three months ended April 5, 2008 are based on 93,759 weighted average shares outstanding. LIZ CLAIBORNE INC. SEGMENT REPORTING (All dollar amounts in thousands) (Unaudited) Three Months Three Months Ended Ended April 5, 2008 % to March 31, 2007 % to (14 weeks) Total (13 weeks) Total NET SALES: Direct Brands $620,150 55.3 % $483,623 45.2 % Partnered Brands 501,392 44.7 % 585,577 54.8 % Total Net Sales $1,121,542 100.0 % $1,069,200 100.0 % Three Months Three Months Ended Ended April 5, 2008 % to March 31, 2007 % to (14 weeks) Sales (13 weeks) Sales OPERATING (LOSS) INCOME: Direct Brands $27,374 4.4 % $50,050 10.3 % Partnered Brands (51,351) (10.2)% (20,320) (3.5)% Total Operating (Loss) Income $(23,977) (2.1)% $29,730 2.8 % Three Months Three Months Ended Ended April 5, 2008 % to March 31, 2007 % to (14 weeks) Total (13 weeks) Total NET SALES: Domestic $722,646 64.4 % $724,734 67.8 % International 398,896 35.6 % 344,466 32.2 % Total Net Sales $1,121,542 100.0 % $1,069,200 100.0 % Three Months Three Months Ended Ended April 5, 2008 % to March 31, 2007 % to (14 weeks) Sales (13 weeks) Sales OPERATING (LOSS) INCOME: Domestic $(34,657) (4.8)% $17,009 2.3 % International 10,680 2.7 % 12,721 3.7 % Total Operating (Loss) Income $(23,977) (2.1)% $29,730 2.8 % LIZ CLAIBORNE INC. RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION SEGMENT REPORTING (All dollar amounts in thousands) (Unaudited) The following tables provide reconciliations of Net Sales to Adjusted Net Sales, which excludes Store Closure Adjustments and of Operating Income (Loss) to Adjusted Operating Income (Loss), which excludes Streamlining Initiatives. Three Months Ended April 5, 2008 (14 weeks) Direct Partnered Brands Brands Total Net Sales: As Reported $620,150 $501,392 $1,121,542 Store Closure Adjustments - (23,302) (23,302) Adjusted Net Sales $620,150 $478,090 $1,098,240 Operating Income (Loss): As Reported $27,374 $(51,351) $(23,977) Streamlining Initiatives 11,956 53,682 65,638 Adjusted Operating Income $39,330 $2,331 $41,661 % of Adjusted Net Sales 6.3 % 0.5 % 3.8 % Three Months Ended March 31, 2007 (13 weeks) Direct Partnered Brands Brands Total Net Sales: As Reported $483,623 $585,577 $1,069,200 Store Closure Adjustments - (6,651) (6,651) Adjusted Net Sales $483,623 $578,926 $1,062,549 Operating Income (Loss): As Reported $50,050 $(20,320) $29,730 Streamlining Initiatives - 10,147 10,147 Adjusted Operating Income (Loss) $50,050 $(10,173) $39,877 % of Adjusted Net Sales 10.3 % (1.8) % 3.8 % LIZ CLAIBORNE INC. RECONCILIATION OF NON-GAAP FINANCIAL INFORMATION SEGMENT REPORTING (All dollar amounts in thousands) (Unaudited) The following tables provide reconciliations of Net Sales to Adjusted Net Sales, which excludes Store Closure Adjustments and of Operating Income (Loss) to Adjusted Operating Income (Loss), which excludes Streamlining Initiatives. Three Months Ended April 5, 2008 (14 weeks) Domestic International Total Net Sales: As Reported $722,646 $398,896 $1,121,542 Store Closure Adjustments (22,636) (666) (23,302) Adjusted Net Sales $700,010 $398,230 $1,098,240 Operating (Loss) Income: As Reported $(34,657) $10,680 $(23,977) Streamlining Initiatives 57,675 7,963 65,638 Adjusted Operating Income $23,018 $18,643 $41,661 % of Adjusted Net Sales 3.3 % 4.7 % 3.8 % Three Months Ended March 31, 2007 (13 weeks) Domestic International Total Net Sales: As Reported $724,734 $344,466 $1,069,200 Store Closure Adjustments (6,651) - (6,651) Adjusted Net Sales $718,083 $344,466 $1,062,549 Operating Income: As Reported $17,009 $12,721 $29,730 Streamlining Initiatives 9,384 763 10,147 Adjusted Operating Income $26,393 $13,484 $39,877 % of Adjusted Net Sales 3.7 % 3.9 % 3.8 %
SOURCE Liz Claiborne Inc.
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