Struggling clothier Liz Claiborne, Inc. (NYSE: LIZ) stepped into the earnings spotlight early this morning, and the stock is down sharply as investors react to a wider-than-forecast quarterly loss.
LIZ confessed to a first-quarter adjusted loss of 37 cents per share, or 97 cents per share on a GAAP basis. Analysts were expecting a much narrower loss of 22 cents per share. Sales for the period slipped nearly 29% to $779.7 million, falling well short of Wall Street's consensus estimate for revenue of $880.8 million.
Looking ahead, LIZ said that its second-quarter loss will be narrower on a sequential basis, but it doesn't expect to return to profitability until the fourth quarter. The apparel issue is predicting same-store sales declines in the range of 15% to 25% for its Juicy Couture, Lucky, and Kate Spade brands. Sales of the company's Mexx brand are expected to fall in the high single digit percent range through the third quarter.
LIZ shares immediately fell to a 24% loss this morning, indicating that traders were caught off-guard by the bleak first-quarter figures. Hopes were definitely running high among option players; during the past 10 days, speculators on the International Securities Exchange (ISE) have bought to open 21 times more calls than puts.
Considering the stock's poor post-earnings reaction, this recent crop of bullish bettors will likely watch their options expire worthless this Friday. With LIZ trading below the $5 level at last check, peak call open interest rests as far north as the May 7.50 strike.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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