LIZ SEES RED, SALES SLIDE
Liz Claiborne warned this year’s profits will miss earlier forecasts, blaming a steep falloff in consumer spending that began last month in the throes of the Wall Street crisis.
The owner of Juicy Couture, Kate Spade and Lucky Brand Jeans has been slammed by deep discounting at department stores as the economic outlook has deteriorated in recent weeks. Sources said business this month has collapsed at luxury outlets including Saks and Neiman Marcus, as well as mid-tier players like Macy’s and J.C. Penney.
In an interview, Liz CEO Bill McComb told The Post his company’s grim news was “not about our brands or strategy,” instead blaming the financial crisis and its toll on shoppers’ wallets and moods.
This month has seen similar warnings from archrival Jones Apparel, Macy’s, and even J. Crew. Separately yesterday, Macy’s about-faced on a decision earlier this year to stop reporting monthly sales figures.
Macy’s CEO Terry Lundgren said the company will resume monthly updates “so investors have a sense of the direction of our business on a more frequent basis through this uncertain time.”
The credit crisis has stoked anxiety that debt-ridden retailers like Macy’s may face a cash crunch if the holidays prove even more brutal than expected. Liz said yesterday it doesn’t expect to trip bank covenants at year’s end, but didn’t disclose its debt levels or borrowing under its credit line, noted Carol Levenson of Gimme Credit, a debt research firm.
“The fact that Liz could be anywhere near violating covenants that were just negotiated a couple of months ago does not give us comfort that management has a handle on the worst case,” Levenson said.
Liz said it expects a third-quarter loss, and lowered its 2008 earnings forecast by 30 cents a share, to between $1 and $1.10 a share. If business slips further, Liz said it may slash its outlook again.
Liz shares, after hitting a 23-year intraday low of $5.05 yesterday, closed at $6.95, off 35 cents, or 4.8 percent.