No Turnaround in Sight for Liz Claiborne Shares

| About: Kate Spade (KATE)

Investors in Liz Claiborne, Inc., (LIZ) have been hoping for a turnaround at the company for years. Liz Claiborne designs and markets clothing which is sold in department stores and through stores operated by the company. In the past 5 years, these shares traded for over $40 per share, and hit a low of about $1.78 on March 2, 2009. More recently, LIZ shares have traded just above and below the $5 level and closed at $5.46 on March 11, 2011. I have been following LIZ shares for over two years now, looking for signs of a turnaround, but after all this time I am still not seeing it. Here are some reasons for this lack of confidence:

The CEO, William McComb, is reported to own about 114,000 shares and other LIZ executives have similar amounts. In my opinion, this is an insignificant amount for a CEO and other top executives to own, especially when you compare the dollar amount of shares owned to the salary, bonuses and other perks received by these executives. You can see the shares owned by these executives here. Also, LIZ insiders have been selling shares and I see no insider buying in the report shown here.

LIZ owns several brands including Juicy Couture, Lucky Brand Jeans, Kate Spade and other. These brands appear to be part of the problem, as these names all face fierce competition. I believe that many consumers view these brands to be average and not at the top in terms of desirability. While the LIZ brands are well known, they do not seem to generate the passion that consumers have for newer, edgier, and more exclusive brands. As an example of this issue, sales for Lucky Brand Jeans fell by about 12% compared to 2009. The company has stated goals in the 2010 annual report, that it is trying to "reposition" the Lucky Brand, "grow" Kate Spade, execute a Mexx Europe "turnaround", and "re-energize" Juicy Couture, etc. Those are not the terms or goals I would use for brands that are in high demand.

Standard & Poors recently downgraded the corporate credit rating for Liz Claiborne, Inc. to a CC rating. You can read about that here.

LIZ continues to lose money and reported (on a GAAP basis) a loss of 24 cents for the fourth quarter of 2010 and a loss of $220 million or $2.34 per share for the full year of 2010. Net sales for the fourth quarter were about $704 million, a decrease of $53 million, or about 7%, from the comparable 2009 period. Revenues for the full year 2010 were approximately $2.5 billion, a decrease of $416 million, or 14.3%, from the comparable 2009 period. You can see this financial data here.

The balance sheet is yet another problem for LIZ. The company has a substantial amount of debt which at year end 2010 totaled about $578 million. After posting repeated losses, the total stockholders' equity is now negative by about $21,681,000. At year end, the cash and cash equivalents were only about $22,714,000.

This company looks like it is in a steady decline. I do not see the type of action from executives that indicate a turnaround, like a major amount of insider buying, and the financial results do not indicate a turnaround to me either. William McComb joined Liz Claiborne in 2006 and while other businesses have seen sharp turnarounds in their revenues and stock price since 2006 and since the global financial crisis, LIZ shares have not.

In my opinion, if the signs of a turnaround are not in place after a few years of this CEO taking charge, then they probably won't be forthcoming in the future. The combination of declining sales, heavy debt loads and a negative book value are not promising for Liz Claiborne investors.

The data is sourced from Yahoo Finance and the Total company website. The information and data is believed to be accurate, but no guarantees or representations are made.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.