Liz Q3 Disappoints With Net Dip

by MR Magazine Staff Oct 27, 2006

NEW YORK – Liz Claiborne Inc. missed Wall Street’s third-quarter earnings expectations Thursday despite better than anticipated savings from streamlining, sending its shares lower in active trading.

The diversified wholesaler and retailer of numerous apparel brands said that net income for the three months ended Sept. 30 declined 16.2% to $95.2 million, or 93 cents a diluted share , from $113.5 million, or $1.06, in the prior-year quarter. Excluding the effects of restructuring and other nonrecurring items, EPS was 96 cents, 3 cents shy of the Wall Street consensus estimate.

Gross margin eased slightly, to 47.4% of sales from 47.5% a year ago.

The miss sent the firm’s shares down $1.12, or 2.7 percent, to end the day at $40.75 in New York Stock Exchange trading. At nearly 3 million shares, volume was more than five times average levels.

Net sales were $1.37 billion, 2.5% above the $1.34 billion tallied in the 2005 period. Favorable foreign currency translation added $19 million to sales in the quarter.

Wholesale apparel sales declined 2% to $821 million, wholesale non-apparel sales rose 3.9% to $206 million, and retail sales were up 14.1% to $331 million as comparable-store sales increased 2.6%.

Paul Charron, in his final earnings statement as chief executive officer, cited disappointing retail results in Europe in his analysis of quarterly results, but identified “the continued strong performance of our Lucky Brand, Juicy Couture and Canadian retail business” and an above-plan showing by the Liz Claiborne business as strong points.

“We have made strong progress with our streamlining initiatives and have, in fact, identified additional opportunities,” he said as he boosted the annual savings estimate to be realized from greater efficiencies to $70 million to $75 million, $10 million higher than previously projected.

For the nine months, net income slipped 24.1% to $181.5 million, or $1.75 a diluted share, from $239.1 million, or $2.20. Sales were essentially flat, rising 0.4% to $3.67 billion from $3.65 billion.