Liz Claiborne forecasts wider loss in an uncertain environment

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When a company decides to warn investors about earnings, let's just say there's never really a good time for it, but some days seem just worse than others.

A day after Eddie Bauer Holdings Inc. (EBHI) filed for Chapter 11 bankruptcy protection and Abercrombie & Fitch (ANF) announced plans to shutter its struggling 29-store Ruehl chain, Liz Claiborne Inc. (LIZ) projected a wider second-quarter loss than analysts forecast. LIZ shares plunged on the news.
The women's apparel manufacturer and retailer troubles didn't start with the recession. Liz Claiborne has been in restructuring since 2006, which even included a management shuffling at the top that brought CEO William McComb to the head job. In 2006 and 2007 it sold many of its brands and increased cost cutting measures, planning to expand with its core brands by moving away from department store sales and establishing a stronger retail presence with higher margins.

In 2008, Liz put its hopes with Isaac Mizrahi as its flagship brand and continued to sell non-core brands, but no matter what it did, barring a few surprises, sales generally continued to decline and the stock to plunge (it's been on a steady decline since the beginning of 2007, dropping over 90 percent) as the recession also hit with full force, hampering many of its plans.

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When Liz last reported earnings in May, it disappointed investors with a wider-than-expected loss. The struggling clothier also said that its second-quarter loss will be narrower on a sequential basis.

Today, Liz said it is predicting its second quarter loss to be wider than the first quarter one, but because of lower restructuring costs the GAAP loss will be narrower than the first quarter. No reason was given for the wider loss though, and one can only assume performance.

LIZ shares have actually performed well along with the market since March lows, mostly due to a Goldman Sachs upgrade in early May that sent the shares up 30 percent. Year-to-date, LIZ has actually outperformed most of its peers and the S&P 500 with a 27 percent climb, but underperformed over the past year with a near 80 percent drop.

It's hard to turn a company around, and doubly hard doing it during a recession, nearly impossible without an economic recovery to accompany it. Sure, cutting costs, selling under performing brands and getting a new, hip, young brand to revive a mature fashion business are certainly important steps to take, but when most predict retail will not fully recover to 2007 levels before 2012, the future of Liz is clouded.
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