Liz Claiborne hires bankruptcy firm as turnaround consultant

It's important to note that bankruptcy is reportedly not being discussed at this point, and the six-week engagement will focus on cost-cutting measures. But the move does speak to the desperation of Liz Claiborne's financial situation -- and lenders would not be this involved in the company's operations if a wave of defaults weren't on the horizon absent a strong holiday season. And that doesn't seem particularly likely.

Liz Claiborne's saving grace may be that, in spite of all the jettisoning of second-tier brands it's done over the past couple years, it still has a number of strong names in its portfolio: Juicy Couture, Kate Spade, Lucky Brand, and, of course, the struggling Liz Claiborne itself. While those brands wouldn't fetch anything like their long-term value in this economy, the company is not without assets that can be unloaded to help deal with its $570 million debt load.

In the meantime, Liz Claiborne is cutting costs and slashing its wholesale operation to cope with the recession. The question for investors is whether the carcass that remains will be worth anything.