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Liz Claiborne (LIZ)

Q1 2012 Earnings Call

April 26, 2012 10:00 am ET


William L. McComb - Chief Executive Officer and Executive Director

George M. Carrara - Chief Financial Officer, Chief Operating Officer and Executive Vice President


Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Jennifer Black

Corinna L. Freedman - Wedbush Securities Inc., Research Division

Kate McShane - Citigroup Inc, Research Division

Casey Flavin

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Janet Kloppenburg

Robert S. Drbul - Barclays Capital, Research Division

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division



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Good morning, everyone, and welcome to the Liz Claiborne First Quarter 2012 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 rebroadcasted without Liz Claiborne's permission. Your participation implies compliance with this requirement. 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 in the Investor Relations section. There are separate links to the slides for webcast and phone participants. Please note that 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 qualification set out in this morning's press release, as well as in the company's 2011 annual report on Form 10-K under the captions Item 1A., Risk Factors and statement regarding forward-looking statements and this first quarter 2012 Form 10-Q under the caption statement regarding forward-looking statements each filed with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Also please note that during this call and in the accompanying slides and press release, sales, gross profit, gross margins, SG&A, SG&A as a percentage of sales, operating income, operating margin, interest expense, net income or loss from continuing operations and EPS are presented on both a GAAP and a non-GAAP basis. EBITDA; adjusted EBITDA; adjusted EBITDA excluding foreign currency gains and losses; adjusted EBITDA margin and comparable adjusted EBITDA excluding foreign currency gains and losses are non-GAAP measures that are also presented in the accompanying slides and press release. The company presents EBITDA measures because it considers them important supplemental measures of its performance and believes they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in its industry. Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release and slides captioned Reconciliation of Non-GAAP Financial Information which will be posted to the company's website at in the Investor Relations section after this call. The company believes that the adjusted results for the first quarter of 2011 and quarterly and fully year periods in 2011 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.

William L. McComb

Good morning and thank you for making time to listen to our report on our first quarter 2012 earnings results. We're presenting today with a slide deck as we usually do, that's available out on the website in the Investor Relations section. And joining me today is our new CFO and COO, George Carrara. George is off to a very strong start here now in week 4. Our company has given him a warm welcome and he's learning our business and already actively leading our corporate transformation work.

Today's call will be brief. I'll offer some overall perspectives on the quarter. I'll review the director consumer comps, and George will summarize the financial highlights from our earnings report. We'll then field some questions.

Overall, we're pleased with the sales and earnings performance during the quarter. Within the brand, we posted very strong growth at Lucky Brand. We posted a strong trend again at kate spade. And Juicy Couture shows positive responses again to new product and marketing, despite posting negative comps.

The reported adjusted EBITDA of negative $1 million met our expectations and we remain on track to deliver the guided 2012 adjusted EBITDA range of $125 million to $140 million, excluding unrealized foreign currency gains and losses. We're highly focused now on rationalizing our corporate expenses while also investing for the efficiency that will deliver the most effective and lean corporate infrastructure possible.

And finally, in terms of overall perspectives, as we've said a few times in response to press generated inquiries, we continue to have no plans today other than to run this business and deliver the growth and earnings expansion that we've been working hard to unlock over the past few years. We're bullish on our future, on our brands and on our people.

So let's have a look at the first quarter. Turning here to Slide Page 3, you'll see January, February, March and first quarter total comps. We gave you a peek at February to date back on February 29, when we reported year end 2011 results. kate spade posted a total direct to consumer comps for the quarter of plus 38%. While February was in line with our guided comp range, March posted very strong results at plus 73%. Month to date in April, kate spade comps are up strong double digits again.

And as I said before, Lucky Brand is posting very strong sales growth. Total direct to consumer comps in February were up 20% and March registered up 18%, with a total quarter at plus 21%. April to date comps are posting right in line with our forecast and up against very high levels year ago.

And at Juicy Couture, the quarterly total direct to consumer comp was down 4%, down 2 points in February and down 3 points in March.

Let's flip to the next page to take a deeper look at each of the brands, starting with Juicy Couture. Here on Page 4, you can see the first quarter performance summary for Juicy Couture. Net sales across the channels and geographies were down 4%. Direct to consumer comps, as I said, were also down 4% for the quarter as well.

Here's what we see going on at Juicy. Apparel is really working. In the first quarter, spring and summer season apparel posted a plus 15% total direct to consumer comp on inventory that was on average during the period down 24%. The new fashion items are selling very well, comprising the strongest, single category comp in the store. These are the advertised items and the ones that are signaling a new look for Juicy Couture.

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