Wednesday, July 21, 2010

Liz Claiborne Will Close Its Outlet Stores

Liz Claiborne Inc. plans to exit its namesake-branded outlet business in the U.S., aiming to cut losses and redirect its capital.

The apparel company, which has reported 10 straight quarters of red ink, expects to take $7 million in impairment charges in the fiscal second quarter as a result.

Chief Executive William McComb said Tuesday that the current fleet of Liz-branded outlets—87 locations in the U.S. and Puerto Rico—was designed to handle clearance for many brands in its portfolio, a plan he called outdated, adding that it no longer makes economic sense, given changes to the company's business strategy. The company said its outlet stores for other brands—Juicy Couture, Kate Spade and Lucky Brand jeans—won't be affected.

Mr. McComb said the capital would be better used to support the company's operations at J.C. Penney Co. and Liberty Media Corp.'s QVC. Penney will begin selling an exclusive line of Liz merchandise next month.

Liz Claiborne has been rebuilding its brands, some of which were struggling before the recession hit consumer spending and mall traffic. It has also been moving to focus more on direct brands.

Along with the second-quarter charge, Liz Claiborne said it may incur added charges in future periods and will provide more information when it reports results Aug. 5.

The action "is another big structural move for Liz," said Brian Sozzi, retail analyst at Wall Street Strategies. "It greatly reduces their overhead, and that is something they still very much need to do. Their next move will likely be to change their name."


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