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Liz Claiborne (LIZ)

Q4 2011 Earnings Call

February 29, 2012 10:00 am ET


William L. McComb - Chief Executive Officer and Executive Director

Andrew C. Warren - Chief Financial Officer and Executive Vice President

Jennifer Black - President

Jennifer Black -


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

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Janet Kloppenburg

Kate McShane - Citigroup Inc, Research Division

Jessica Schoen

Jessica Schoen - Barclays Capital, Research Division

Unknown Analyst

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Good morning, everyone, and welcome to the Liz Claiborne Year End 2011 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.

The 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 qualifications set out in this morning's press release, as well as in the company's 2011 annual report on Form 10-K filed with the SEC under the caption Part 2, 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, sales, gross profit, gross margins, SG&A, SG&A as a percentage of sales, operating income, operating margin and interest expense, net income or loss from continuing operations and EPS are presented on both a GAAP and non-GAAP basis. EBITDA; adjusted EBITDA; adjusted EBITDA, excluding foreign currency gains and losses; adjusted EBITDA margin and pro forma 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 fourth quarter and full year 2011 and 2010 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. Welcome to our Fourth Quarter and Year End 2011 Earnings Results Conference Call. I'm joined today for the last time by our current CFO, Andy Warren, who will be with the company through March 16. And as announced back in early January, he will then be moving to Discovery Communications as their CFO. I'm very grateful that Andy has been able to stay with us through the quarter and year-end close and through the filing of the 10-K today.

Okay, so let's have a look at our results. 2011 marked a year of significant transformation for the company. For me, the highlight of the year was the extraordinary performance of our core Direct Brands portfolio. We saw outstanding growth and profit expansion at both kate spade and Lucky Brand. And at Juicy Couture, we saw a team come together and rally behind a very compelling vision for that brand, a vision that is now beginning to manifest itself in stores. Many years of hard work have come together to give this total portfolio a very inspiring future and to create momentum.

For others, the highlight came from our balance sheet deleveraging achieved through portfolio rationalization. This also allowed us to meaningfully de-risk our operations, which now include the 3 global lifestyle brands we've been positioning for growth for the past several years, plus a cluster of profitable, wholesale brand relationships, most of which are based on exclusive vendor agreements with strategic partners. This group is now called the Adelington Design Group. And although small in stature, it's expected to provide an annuity-like profit stream for several years to come.

Turning now to Slide Page 3, key priorities for 2012. So as we turn the page on the calendar to early January, we identified 3 major priorities for our company for 2012. First, we're forecasting adjusted EBITDA of $125 million to $140 million. To achieve this, we will take action aimed at further unlocking growth opportunities in each of the core brands. This means we will again anniversary growth at kate spade with comps this year projected to be in the teens, and 2012 total revenue growth to be expected to exceed 30%. It also calls for a second year of substantial growth at Lucky Brand, where we have planned comps to be around the 10%-plus mark. And importantly, it means seeing the start of the same kind of growth turnaround at Juicy Couture that we've achieved in the past at both kate spade and Lucky Brand, with Juicy Couture projected to deliver a flat comp in the first half and a 10-plus comp in the second half. We plan to open a total of 35 to 40 additional stores this year across the 3 brands as part of this growth agenda, most of which will go to the kate spade and Jack Spade brands.

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