Earnings Preview: Liz Claiborne

OVERVIEW: The New York-based apparel maker, like its rivals Jones Apparel Group Inc. and VF Corp., is facing some major challenges as consumers dramatically cut back their spending on clothing and other discretionary items.

The company--which announced a major restructuring last year to focus on fewer but more powerful brands like Juicy Couture and Lucky--cut its fourth-quarter and full-year earnings outlook last month. Chief Executive William L. McComb said then that the financial meltdown that intensified in September has resulted in "real changes in spending patterns in our stores" as well as deeper discounting at its department store partners.

Meanwhile, to revive its iconic-but-aging namesake brand, Claiborne in January hired designer Isaac Mizrahi as creative director for the label. His first collection will arrive in stores this spring.

BY THE NUMBERS: Claiborne said last month it expects a loss from continuing operations of 8 cents to 14 cents per share in the third quarter. Excluding expenses for streamlining initiatives and exiting brands, the company predicts a profit from continuing operations of 37 cents to 42 cents per share. Analysts surveyed by Thomson Reuters expects 37 cents per share.

Liz Claiborne also noted last month that it now expects yearly earnings of $1 to $1.10 per share, from previous guidance of $1.40 to $1.50 per share. Analysts surveyed by Thomson Reuters expect $1.05 per share.

ANALYST TAKE: Goldman Sachs analyst Adrianne Shapira wrote in a report last week that while she remains "bullish" on the Mizrahi-led relaunch for Liz Claiborne's namesake brand she believes that sharply lower traffic trends at its other brands could offset those margin gains. As a result, she cut her fiscal 2009 earnings forecasts to 93 cents per share from $1.55 per share to reflect continued weakness over the next two to four quarters. Analysts surveyed by Thomson Reuters expects 99 cents per share for 2009.

WHAT'S AHEAD: Investors will want to know more details about the holiday business and how Claiborne's department store partners are approaching next year's orders. Analysts will also want more details regarding what the Claiborne label under Mizrahi looks like.

STOCK PERFORMANCE: Shares rose almost 4 percent during the quarter but the stock has lost 75 percent of its value over the past 52 weeks. Shares closed at $6.73 on Friday, the low end of its 52-week per share range of $28.36 and $5.05.