Shares of Liz Claiborne (NYSE: LIZ) tumbled this week on an even weaker than expected second quarter earnings report, but the stock has since moved back to where it was before the release. Still: it's trading at $14.85, compared with the $40+ per share it was fetching in early 2007.Suffice it to say, investors are skeptical about the company's prospects for a turnaround. The company said it expects to earn $1.40-$1.50 per share for 2008 so the price/earnings ratio is in the 10-range.
But there could be reason to expect tremendous upside over the long-term: back in January, the company signed legendary designer Isaac Mizrahi. At the time, I wrote that "If anyone can save the struggling fashion house, it's the man they just signed to be creative director of the company's flagship brand: Isaac Mizrahi. You can be sure he didn't come cheap, but he's just what they need. After all, this is the guy who actually managed to make Target (NYSE: TGT) a cool place to shop for clothes."
In the second quarter earnings release, the company referred to the "2009 re-launch of our flagship Liz Claiborne brand under the design direction of
I'm inclined to agree. I'll repeat it again: Mizrahi made Target a cool place to shop for clothes and, while Liz Claiborne is struggling, it still enjoys enviable brand recognition. If Mizrahi can do for Liz Claiborne anything like what he did for Target, the paltry valuation could send the stock soaring.
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