Liz Claiborne
(NYSE:LIZ) updated shareholders on its restructuring efforts and gave
an upbeat long-term outlook. The American sportswear maker announced
that it would shed 16 of its apparel brands and cut nearly 800 jobs in
an effort to reduce its reliance on department stores and push their
own in-house brands. CEO William McComb said the company is targeting
operating margins in the mid-teens percentage with ROIC growth in the
high-teen percentage.
Liz Claiborne has traditionally been known
in the investment community as an acquisition-driven company. The
company's previous strategy had been building a big brand portfolio to
hedge against unpredictable fashion cycles. However, this strategy led
to some unforeseen consequences that drew concern from investors. While
the company's revenues grew, the company saw a substantial increase in
both management complexity and overhead costs.
Liz Claiborne
plans to cut these expenses and reduce complexity by selling off 16 of
its brands while doubling its spending on advertising for its remaining
brands. The company also wants to open 300 of its own stores by 2010 to
further reduce its dependence on department stores. At the same time,
the company plans to cut $190 million in annual expenses through
workforce reductions and other cost-cutting measures.
Analysts
expect improvements in the company's financials to be visible in 2008.
Many analysts and investors are also hoping that CEO McComb will be
able to turn around Liz Claiborne's brands like he did J&J's
Tylenol brand in his prior position at that company. Combined, these
cost-cutting and restructuring efforts could lead to a turnaround in a
company that has seen somewhat dismal performance amid a struggling
apparel market. This makes LIZ a stock
worth watching!
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