Stock Screener: Liz Claiborne's restructuring in progress

Liz Claiborne, Inc. designs and markets an extensive range of branded women's and men's apparel, accessories and fragrance products. Brands include Bora Bora, C & C California, Claiborne, Curve, Dana Buchman, Ellen Tracy, Enyce, Intuitions, J.H. Collectibles, Juicy Couture, Kenzie, LIZ, Liz Claiborne, Lucky Brand Jeans, Mexx, Monet, Soul, Villager and Yzza, among others. Liz Claiborne also has an exclusive, long-term license to produce and sell men's and women's collections of DKNY Jeans and DKNY Active in the Western Hemisphere. The Company also has the exclusive license to produce jewelry under the Kenneth Cole New York and Reaction Kenneth Cole brand names.

The company divides its business into Wholesale Apparel, Wholesale Non-Apparel and Retail.
The Wholesale Apparel segment consists of businesses that design, manufacture and market the company's product. The Wholesale Non-Apparel similarly deals with accessories, cosmetics and jewelry products. Retail consists of company-operated stores and outlet stores that directly sell Liz Claiborne's merchandise to the public. As of December 31, 2006, Liz Claiborne operated a total of 399 specialty retail stores (258 within the U.S., 141outside), 336 outlet stores (206 within the U.S., 130 outside) and 625 concession stores in Europe.

Liz Claiborne market capitalization is $4.56 billion and it has traded at a 52-week range of $33.62, set in mid-July of lat year and $46.84 set in February. At $44.09, LIZ's yesterday's close, the company trades near its 52-week high. LIZ trades at a TTM multiple of 17.9 and a forward multiple of 13.6.

On February 28, Liz reported fourth quarter and fiscal 2006 results, posting a net earnings decline of 6.6% to $73.2 million, or 71 cents per share. However, Liz Claiborne adjusted quarterly profit was 94 cents a share, lower than analysts' expectation of 96 cents per share.

Meanwhile, net sales grew 10.8% to $1.329 billion in the quarter and increased 3.0% for the full year to $4.994 billion, boosted by double digit growth in its wholesale non-apparel and retail segments, as well as from the acquisitions of Prana, Mac & Jac and Kate Spade.

Net income for the full year 2006 decreased to $255 million from $317 million for the full year 2005. Diluted earnings per common share decreased 16.3% to $2.46. Adjusted diluted EPS for the full year 2006 were $2.99.
In 2006, adjusted operating margin increased to 12% from 10.8% in 2005.

Other recent events and key points:

• The company also said it will no longer provide quarterly earnings guidance and will provide 2007 after July guidance once it has completed its review of operations. The restructuring would likely affect Wall Street earnings estimates.
• Liz Claiborne pays quarterly dividend of $0.05625 per share for a paltry dividend yield of 0.5%.
• Goldman Sachs downgraded the stock recently from Buy to Neutral last month.
  
• In December 2006, Liz Claiborne completed its $124 million deal to buy Kate Spade LLC, the upscale handbags, jewelry and men and women accessories designer, from Neiman Marcus.

What's ahead for Liz?

Liz Claiborne is finishing up a year of costly restructuring brought on by new CEO William McComb. It sold off many of its smaller lines in 2006. While Liz sells worldwide, only 28% of sales in 2006 came from outside the U.S.. To drive future growth, the company will make the effort to expand in Europe and Asia.

Chairman Trudy Sullivan explained that the main drivers for growth will be acquisition of smaller brands that the company hopes will become tomorrow's hot luxury brands as well as expansion into China and India. In July, the company will unveil further plans.

In 2007, the company will also continue its retail expansion strategy as it plans to open 100 - 125 specialty retail stores globally, with the majority of the store openings focused on the Juicy Couture, Lucky Brand, Mexx and Kate Spade formats.

Fortune also recently interviewed Liz Claiborne's Chief Creative Officer, Tim Gunn. Pulling no punches, the interviewer called Liz Claiborne's brands 'dowdy.' Tim Gunn naturally disagreed, saying "We've gone away from that dowdiness and we're giving the customer fashion." Another article addressing the same dowdiness problem of Liz Claiborne, have the company's executives saying "the brand is starting to show signs of life. Since the new styles arrived in stores last fall, sales are up in the "high single digits" - an assertion that is corroborated by some large retailers."

Comparing Liz Claiborne to its competitors doesn't paint the finest picture, but not the worst either: While Liz Claiborne definitely has better fundamentals than, oh, JNY, which isn't saying much, but not as good as Polo Ralph Lauren Corp.'s (NYSE: RL) fundamentals. On average, analysts rate the stock Hold with a target price of $45.

If I had to buy one of the two, JNY or LIZ, I'd go with LIZ. While the company might be slightly more risky at the moment due to its restructuring plan, it is this plan that also gives hope. Imagine that -- the company agreed to a lower-waisted pant design!

Well, It will be interesting to hear what the company says in July, and in the meanwhile, there are also always the rumors regarding a takeover.