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Liz Claiborne Inc. earnings tumbled 65 percent in the third quarter as retailers canceled orders, reduced replenishment lines and bought cautiously from the apparel giant's nine brands that are up for sale.
For the three months ended Sept. 29, net income fell to $33.1 million, or 33 cents a diluted share, from $95.2 million, or 93 cents, in the same period last year. Sales for the period slid 4 percent to $1.26 billion from $1.31 billion.
"It's not like there are a lot of vendors that are succeeding extraordinarily in partnered brands," chief executive officer William L. McComb told WWD. "The environment is tough and retailers are being conservative. With our new hat of responsibly managing the supply line, we've encouraged that."
Sales growth of 18 percent in the direct brands — Juicy Couture, Lucky Brand Jeans, Mexx and Kate Spade — to $629 million from $527 million, could not overcome losses of 19 percent in the troubled partnered brands, to $634 million from $781 million.
Adding to the weakness in partnered brands were costs from the company's restructuring. Lost income from sold brands, increased strategic selling and general and administrative costs all dragged down the $4.99 billion vendor's bottom line.
Claiborne is in the second phase of a strategic restructuring plan, which involves focusing on direct brands and divesting 16 partnered brands, including Ellen Tracy, Dana Buchman and Sigrid Olsen. The company has sold four moderate brands to Li & Fung, combined two moderate brands into existing brands and discontinued a final moderate brand last month. It is focusing on selling its higher-margin brands, which the company predicts will be completed by the end of the first quarter of next year, rather than the second, as previously anticipated. After receiving initial bids this month, Claiborne said it is meeting with select bidders for management meetings and due diligence.
Meanwhile, McComb said the partnered brands "have met some cautious buying patterns from wholesale partners who are waiting to see the results of the review." Across the nine remaining brands on review, he said the company has had order cancellations and reductions in replenishment lines.
"You announce you are putting brands under review and it's a scary thing for retailers," McComb said. "While it isn't a race against the clock, it is in the best interest of everyone to finish Phase II sooner than later."