Liz Claiborne CEO Discusses Q3 2010 Results - Earnings Call Transcript
Liz Claiborne Inc. (
)
Q3 2010 Earnings Call
November 04, 2010 10:00 am ET
Executives
Bill McComb - CEO
Andy Warren - EVP & CFO
Analysts
Edward Yruma - KeyBanc
Alfred Chen - Citi Investments
Bob Drbul - Barclays Capital
Mary Gilbert - Imperial Capital
Chi Lee - Morgan Stanley
Jim Chartier - Moness Crespi Hardt
Robin Murchison - SunTrust
Lana Si - Bank of America
Presentation
Operator
Compare to:
Previous Statements by LIZ
»
Liz Claiborne Inc. Q2 2010 Earnings Call Transcript
»
Liz Claiborne Inc. Q1 2010 Earnings Call Transcript
»
Liz Claiborne Inc. Q4 2009 Earnings Call Transcript
»
Liz Claiborne Inc. Q3 2009 Earnings Call Transcript
Good morning everyone and welcome to the Liz Claiborne Third Quarter 2010 Conference Call hosted by Chief Executive Officer, Bill McComb. After the opening remarks we will be taking questions. This call is being recorded and is copyrighted material. Therefore, please note that it cannot be recorded, transcribed or re-broadcasted without Liz Claiborne's permission. Your participation implies compliance with these requirements. If you do not agree simply drop off the line.
Please note that there will be a slide presentation accompanying the prepared remarks. The slides and earnings release can be accessed at www.lizclaiborneinc.com in the Investor Relations section. There are separate links to the slides for webcast and phone participants. Please note that the statements made during this call that relate to the company's future performance and future events are forward-looking statements within the Private Securities Litigation Reform Act. These forward-looking statements are based on current expectations, and are subject to the qualifications set out in this morning's press release, as well as in the company's 2009 annual report on Form 10-K and second quarter 2010 quarterly report on form 10-Q filed on august 5, 2010 and at third quarter 2010 quarterly report on form 10-Q being filed today with the SEC in each case under the captions Item 1a Risk Factors and statement regarding forward-looking statements. Also, please note that during this call and in the accompanying slides and press release, net sales, gross profit, gross margin, SG&A, SG&A as a percentage of sales, operating income or loss, operating margin, interest expense, net income or loss from continuing operations and EPS. Reconciliations of adjusted results to the actual results are available in the tables attached to the earnings release and slides captioned Reconciliation of Non-GAAP Financial Information.
The company believes that the adjusted results represent a more meaningful presentation of its historical operations and financial performance, since they provide period-to-period comparisons that are consistent and more easily understood.
Now, I would like to turn the call over to your host, Mr. McComb. Please go ahead, sir.
Bill McComb
Good morning and welcome to our third quarter 2010 earnings report conference call. This morning’s call is being webcast along with speaker’s support slides per usual which we will refer to throughout the call. These slides can be viewed now with our commentary or accessed via the investor relations section of our corporate website lizclaiborneinc.com.
Andy Warren, our CFO is also here with us and will add to the commentary in the Q&A session. We’ll follow our typical format. I’ll provide some opening perspectives on the quarter and our framework for performance in the second half of 2010 overall and Andy will walk you through a detailed review of third quarter performance. I will then review the adjusted segments results and provide closing remarks.
We are pleased with the results that we posted in this mornings press release. Third quarter by and large played out as we had described that it wouldn’t back in August when we reported our second quarter earnings. Our business is showing operational traction in many key areas and we remain on track for ongoing system wide profit expansion.
We are very pleased with the progress that we are making at Mexx Europe. We’ve seen several weeks with positive comps in both the retail stores and our e-Commerce business and our wholesale accounts are indicating increases for the April-May period. We are pleased with our performance in concessions in department stores with some important Bellwether locations reporting even stronger then our own comp trend and we are seeing strengthened women's products sell-throughs that we haven’t seen in five years.
At Lucky brand the trend is also improved, we are no longer seeing the minus 20 to minus 30 comp store declines. The comps by major classification shows some triumphs, we are specially encouraged by excellent progress in both men's and women's fashion, where sell-throughs in same store sales increases have been strong. Denim, overall in the market place is soft as we've heard from other retailers but Lucky brand is responding by managing price points, promotion and inventory levels.
With both Mexx and Lucky brands we're seeing what happens when you take a business that is suffered a long-term decline and radically changed it with brand appropriate product and marketing. You got immediate conversion of full price on some great items. Comp sales results begin flashing to positive and what I'll call a blinking pattern, traffic can remain sluggish but as the store widows and marketing campaign start to stimulate new interest this will begin to change.
Traffic lags, conversion leads, you focus on the critical product categories first. Men's and women's core in fashion and look for specific wins, product classifications that resonate, items marketed in windows and catalogs that check well, being very mindful of what's working and what’s not and making adjustments to future assortments to reflect this.
Once the consumer embraces the new direction in the critical core, other categories like accessories and kids will ramp up adding to the same-store sales build. This was how Kate Spade pulled out of its sluggish and negative period over a year ago.
Overall the leading indicators at both Mexx Europe and Lucky brand jeans are encouraging. Juicy Couture had a very strong third quarter with sales up 11% and profits up double digits. Business was very good in our retail stores and on our E-Commerce site and a significant improvement in on-time deliveries was the key factor in driving the improvements in sales growth versus the first half of the year.
Juicy achieved these results despite ongoing rationalization of the wholesale business where sales were down versus last year and will probably be down again in the fourth quarter. Juicy continues to enjoy a strong brand franchise with the consumer and remains an important contributor to our overall profit picture.
Kate Spade now up against the year ago category launch of apparel is showing outstanding sales results in all product categories including handbags where design upgrades are playing well with the consumer. The Liz Claiborne business at JCPenney is tracking very well. We are very pleased with our partner’s execution including product quality and sourcing. It is placement on the floor their marketing effort, the tone intender of the partnership and the plans we both have for the future.
We are also pleased with our overall performance on Air with the Liz Claiborne New York brand on QBC. We are efficiently managing our exit from the Liz Claiborne branded outlet stores. And I am happy report that our actions there are on schedule. So while I am generally pleased with how our businesses are operating. I also must take a second to reiterate what I have said all year and what many of you are hearing the consumer and the market place overall.
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