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In the partnered business portfolio, brands under strategic review and those that Claiborne is keeping — most prominently, the Liz Claiborne brand — both are suffering from "very cautious" fourth-quarter retail orders and "delivered softer-than-expected sales" this quarter, part of an industry trend, McComb said.
Citigroup retail analyst Kate McShane said Claiborne's announcement about retailers' orders could be the beginning of grim news as other vendors start to report third-quarter results.
"This is the first real indication directly from a company that there has been cancellations of orders," McShane said. "Liz's outlook for the fourth quarter and 2008 is concerning for all manufacturers and confirms that between now and holiday the industry is going to be tough."
McShane added that the retail environment today is even tougher than when Claiborne held its July 11 Investor Day to present its plan.
"It is a different retail environment out there [since the July 11 announcement], but how we execute the strategy is what is important, not reconsidering the strategy," McComb said. "The big theme of the call is patience. The dumbest thing we could do is retrench on [the direct brands] aspect of our strategy. "
The Liz Claiborne brand, which still makes up about one-fifth of the company's sales, continues to experience difficulties. "The Liz Claiborne brands suffered a one-two punch from product issues and the warm fall weather," McComb said.
While the Liz & Co. exclusive at J.C. Penney has continued to prosper, the namesake line as well as the Villager line at Kohl's have hurt sales.
Management added that it is pulling back on marketing investment for the Liz Claiborne brand after being underwhelmed by the results of the Liz Is campaign.
"The Liz Is campaign with the timing of the Liz & Co. launch sent the wrong message," said Dave McTague, the new executive vice president of partnered brands. "We will be moving a significant amount of marketing spend to the consumer experience."
McTague said he is close to completing his Liz Claiborne brand turnaround plan, an initiative that he said has been his first priority in the two months since the former Converse president joined Claiborne. He said it will stand on three pillars: aggressive product improvement; demand creation and marketing, and product presentation.