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Executives

Andrew C. Warren - Chief Financial Officer and Executive Vice President

William L. McComb - Chief Executive Officer and Executive Director

Analysts

Grant Jordan - Wells Fargo Securities, LLC, Research Division

Robin S. Murchison - SunTrust Robinson Humphrey, Inc., Research Division

Carla Casella - JP Morgan Chase & Co, Research Division

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Kate McShane - Citigroup Inc, Research Division

Casey Flavin - CJS Securities

Unknown Analyst -

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Liz Claiborne (LIZ) Q3 2011 Earnings Call November 9, 2011 10:00 AM ET

Operator

Good morning, everyone, and welcome to the Liz Claiborne Third Quarter 2011 Conference Call, hosted by Chief Executive Officer, Bill McComb. After the opening remarks, we will be taking questions. This call is being recorded and is copyrighted material. Therefore, please note that it cannot be recorded, transcribed or rebroadcasted without Liz Claiborne's permission. Your participation implies compliance with these requirements. If you do not agree, simply drop off the line.

Please note that there will be a slide presentation accompanying the prepared remarks. The slides and earnings release can be accessed at www.lizclaiborneinc.com in the Investor Relations section. There are separate links to the slides for webcast and phone participants.

Please note that statements made during this call that relate to the company's future performance and future events are forward-looking statements within the Private Securities Litigation Reform Act. These forward-looking statements are based on current expectations and are subject to the qualifications set out in this morning's press release, as well as in the company's third quarter 2011 Form 10-Q filed with the SEC under the caption Part 2, Item 1A, Risk Factors and Statement Regarding Forward-Looking Statements.

Also, please note that during this call and in the accompanying slides and press release, sales, gross profit, gross margin, SG&A, SG&A as a percentage of sales, operating income, operating margin, interest expense, net income or loss from continuing operations and EPS are presented on both a GAAP and a non-GAAP basis. EBITDA; adjusted EBITDA; adjusted EBITDA, excluding foreign currency gains and losses; adjusted EBITDA margin; and the pro forma adjusted EBITDA, excluding foreign currency gains and losses are non-GAAP measures that are also presented in the accompanying slides and press release.

The company presents EBITDA measures because it considers them important supplemental measures of its performance and believes they are frequently used by securities analysts, investors and other interested parties in the evaluation of companies in this industry. Reconciliations of adjusted results to the GAAP results are available in the tables attached to the earnings release and slides captioned, Reconciliation of Non-GAAP Financial Information, which will be posted to the company's website at www.lizclaiborneinc.com in the Investor Relations section after this call.

The company believes that the adjusted results for the third quarter 2011 and 2010 represent a more meaningful presentation of its historical operations and financial performance since they provide period-to-period comparisons that are consistent and more easily understood.

Now I would like to turn the call over to your host, Mr. McComb. Please go ahead, sir.

William L. McComb

Good morning, and thanks for dialing in to hear our earnings results for third quarter 2011. It's been an active few months around here, needless to say, and we've been keeping you busy with our many updates.

Joining me on the call will be Andy Warren, our CFO. And as we usually do, we'll be webcasting this morning with the use of speaker support slides, which will be posted after the presentation in the Investor Relations section of our corporate website.

I'll say right upfront that we were very pleased last week to have announced both the Mexx and J.C. Penney deal closures on top of the transactions we closed back in October. Having completed these transactions allows us to focus on the future on where our company is headed and the growth and margin expansion we're working to achieve with what is turning out to be a momentum portfolio.

I'll start the call by providing a perspective on the new company that remains and by commenting on our longer-range goals for 3 Domestic-Based Direct Brands. Then, we'll discuss our 2012 adjusted EBITDA guidance and review the financial results for the third quarter. And we'll wrap up with the segment results, which I'll do, followed by a Q&A session.

With the completion of the Mexx and Partnered Brands transactions, we're now a company with the following profile.

We expect the 2012 adjusted EBITDA of $130 million to $150 million. We have a healthier balance sheet and significantly reduced operating risk and complexity.

We're anchored by 3 high-growth retail-based brands with significant expansion potential in global markets, spanning multiple product categories. We expect all 3 of these brands will ultimately have normative operating margins, inclusive of corporate allocations, in the mid-to-high teens.

We will also be operating a private label jewelry division, which has exclusive agreements to design, manufacturer and supply jewelry for the Liz Claiborne, Monet and Dana Buchman brands on a wholesale basis, while continuing to offer the Trifari and Marvella brands. This group is neither complex nor expensive to operate and represents a high-margin component of the Partnered Brands world.

In addition, we secured a sub-license from J.C. Penney in the deal completed last week to maintain the licensed Liz Claiborne New York business at QVC through 2020 and to keep making and selling Lizwear to the club class of trade.

So as we look forward to 2012, we have 3 major priorities that will drive our agenda: first, unlocking growth in the Domestic-Based Direct Brands; second, strengthening our global footprint; and third, transforming our corporate infrastructure in size and scope to better and more cost-effectively serve our new portfolio.

Let's take a deeper look at each of these goals, starting with the snapshot of the 3 core brands.

Kate Spade was the first of the 3 brands to be fully rebuilt internally here and now has more than 22 months of momentum behind it. After establishing new business and creative leadership, reimaging the retail stores and marketing, refocusing the target audience and strengthening direct-to-consumer capabilities, we've posted year-to-date direct-to-consumer comp sales growth of 74%.

Many of you like to be reminded of our vision, not just our current 12-month business plan, but also the broader goals that we're playing for overall. This chart frames those out for you.

We see this as a brand that can go far, with a global retail sales target of $2 billion or greater. We already have an e-commerce business that does over $60 million in annual sales. We see that revenue base growing very fast over the next few years, and it will remain a central point of focus.

We support that e-commerce business with the retail fleet that has the potential to be 185 to 225 stores in the U.S. and 400 internationally. The international stores will be either operated directly by us, as we do with our stores in London and Brazil right now, or through partners or joint venture teams. We will maintain our goal of capital-efficient international expansion. We expect international sales will be as high as 65% of total retail sales, with the major emphasis on Asia.

On a reported basis, we expect 65% of our sales will come from direct-to-consumer revenues and 35% from wholesale. The wholesale sales revenues would include international sales to distributors. We see apparel making up roughly 30% of the total mix. This means Kate Spade remains an accessories-based brand but one with a large and important apparel component as well. It means our teen thinks of Ralph Lauren as a business analog as much as it thinks of Coach as a business analog.

We see this business as having a normative operating margin in the high teens, even low 20s over time. On a brand-direct operating basis, before corporate allocations, we expect double-digit operating margins in 2011. And with corporate allocations, we expect that number would be mid-to-high single digits.

We will also be accelerating the Jack Spade brand growth and looking at additional sub-brand opportunities as well. Jack Spade today is making money and is growing rapidly.

The second brand that has gone through one of our business and creative transformations is Lucky Brand Jeans. Again, it is a brand with tremendous likability and high popularity ratings by consumers. In 2011, we've seen 9 consecutive months of direct-to-consumer growth. Here, we have a broadly targeted brand that is rooted in denim and a casual lifestyle. Our goal for the brand is to surpass a $1 billion in retail sales.

This business also has a multi-category, multi-channel and multinational potential in front of it. Our immediate goal is to expand the profit margin by rebuilding the productivity of the current retail fleet, but we see the business having the ability to carry 250 full price stores and 100 outlet stores in the U.S. alone.

The business will go back overseas, starting in London in late 2012, tapping the opportunity more broadly and moving into countries such as China and Japan as the brand strength fully reemerges here. International expansion will likely be done with partners, both distributors and joint venture structures, following our corporation's capital-light approach.

We love the accessible premium positioning of this brand for every market around the world. The price points put Lucky above the mass or commodity denim brands, but not so high that it is seen as luxury or unattainable. There's an emphasis on quality, originality and craftsmanship, with an artisan and creative twist.

Scaling the brand will include partnerships in new categories like Lucky Kids, which is relaunching right now via e-commerce in 10 stores. Accessories, Home and more premium Lucky Legend are part of the growth plan as well.

We expect this business will also be 65% direct, with the wholesale business totaling 35% of sales. The wholesale business has now begun to grow again, having recently tapped into the strategies that have proven to work in our retail stores.

We aimed for a mid-teen operating margin long term for this business. But I'm happy to report that on a brand direct basis, before corporate allocations, we expect to be back in the black in 2011, up significantly from last year and with real momentum going into 2012.

Now turning to Slide Page 6, Juicy Couture.

Probably still the business with the broadest awareness globally, this is a business that we see having retail sales potential over $1.5 billion. We've talked a lot about the changes that we're making in management here, which came a year after Lucky Brand's management team arrived and almost 2.5 years later than kate spade's team. So we're on the cusp of the turn, so to speak, but the brand is a very viral one, with a very strong base of enthusiasts that are early adopters and fashion-forward and very much looking for newness from Juicy.

We expect growth again in the U.S. next year as we re-couture the stores. 10 have just been completed. And throughout next year, we expect the whole fleet will be updated.

We opened a flagship in Beijing through our distributor in the new format, as well as a new store in London's Westfield Mall, and we're very happy to report that the consumer response to both has been strong.

We anticipate a domestic versus international sales split near 50-50, although we'll put tremendous emphasis on tapping the consumer opportunities in Asia and Europe very quickly as the product restage comes together this spring.

We plan to achieve an accessories category penetration just over 50%, driving even higher margins and new distribution opportunities.

With this business, we're aiming for operating margins in the mid-to-high teens. While this business has seen margin compression, driven by the productivity softness in the U.S. during the brand restage, we've seen very high operating margins in the past and we're confident that the right product direction will restore our pricing power in turn.

This year has been for Juicy Couture what 2010 was for Lucky Brand, but we believe we're right on track for next year with the store, merchandise and marketing plans that play to the power and the strength of the brand itself.

Let's turn now to Slide Page 7 to see the comp results for these 3 brands for the quarter.

Here, you can see the monthly direct-to-consumer comps from July through September, the third quarter total comp and the estimated final comp for the month of October.

Starting with Juicy. Juicy's direct-to-consumer comp sales declined by 8% for the quarter and 13% for the month of October. You'll see shortly from Andy that Juicy Couture inventory has been down dramatically and their gross margin rate is actually in line with a year ago even with the cotton pressure that impacted IMU in this period. While Juicy Couture comps of minus 13% were below our expectation, we remain excited about renewed growth based upon early reviews of the new team's product, which is already in the pipeline and will ship in the first quarter of 2012.

Okay, Lucky Brand. Lucky Brand has seen very strong comps. Here, you see September coming in, plus 24%, and October at plus 23% above our forecast. Margin rate at Lucky Brand is also impressive, again, given the IMU pressure that we faced going in. All of the strategies that we've discussed this year for Lucky Brand are working, such as women's denim, tops, the relaunch of accessories and the sustained strength in men's. Conversion and AUR are both adding to the positive momentum, and the marketing is really working.

kate spade posted a plus 114% direct-to-consumer comp in September, a plus 78% for the third quarter and an estimated plus 54% in the month of October. The newly opened London stores are performing well and the international businesses, too. Again, there is tremendous momentum across this brand.

So as I said, our third major goal for 2012 will be transforming our corporate infrastructure to better serve our revised portfolio of businesses. We've been working on this for 5 full years, variabilizing costs structure, partnering where possible, increasing internal transparency, driving internal service agreements that are metric-based and all along, reducing costs.

The changes that we've now announced with Mexx and Partnered Brands mean that we have more work to do to deliver a more efficient and scaled corporate infrastructure. Having just about completed the $25 million cost reduction that we announced at the end of July, we're now ready to begin the next one.

So now that I have provided a perspective on our repositioned company and have reviewed the long-term prospects of the core businesses, let me turn the call over to Andy to discuss the 2012 adjusted EBITDA guidance, the corporate cost reduction targets and the third quarter performance in greater detail. Andy?

Andrew C. Warren

Thank you, Bill. Let me start on Slide 8, by further vetting our 2012 adjusted EBITDA guidance.

We're forecasting a range of $130 million to $150 million for next year. This slide breaks our range down and isolates total true corporate overhead that we will be further reducing. We're providing this additional level of disclosure due to the recent and dramatic changes to our portfolio and size of our company. However, we do not anticipate providing this breakout on an ongoing basis.

First, you see that by taking out the allocated corporate costs, we expect Partnered Brands next year will be posting an adjusted EBITDA of $20 million to $25 million off a revenue base that will be under $100 million. This will be projected in combined sales and profit base for our private label jewelry group, the QVC license and the Lizwear club business. This is now a low complexity, low risk business that we will operate with minimal capital spending and inventory levels.

For Domestic-Based Direct Brands, again looking at the EBITDA, excluding the allocated corporate costs, we expect to see a range for 2012 EBITDA of $180 million to $200 million. We expect double-digit sales growth in these combined brands and double-digit EBITDA growth as well. The plan derives top line growth from several areas and assumes achievable momentum in all 3 brands, with a positive but conservative domestic rebound at Juicy Couture. The plan assumes 35 to 40 additional stores, many of which won't open until the second half of 2012, with roughly 20 to 25 of these being kate spade and Jack Spade doors.

At the right side of the page, you see total corporate overhead, shown here aggregated and unallocated as one group. Even after the recent and successful $25 million cost reduction, the current annualized run rate for these back-office functions are $70 million to $75 million. Included in this group are centralized IT, finance, legal, communications and corporate facilities. With the recent changes to our portfolio, we plan to further reduce these corporate costs by approximately $15 million by the end of 2012, therefore targeting 2013 corporate overhead to be between $55 million and $60 million. Additionally, we believe that an achievable but aggressive longer-term goal is a total corporate cost footprint reduced to $45 million to $50 million. We've already chartered a team internally to go after these savings, some of which will require IT investments, to drive sustainable future savings and cost efficiencies. We will continue to provide updates on our progress towards achieving these goals on future earnings calls.

On Slide 9, you see a few additional key financial assumptions in our plan for next year.

We anticipate total depreciation and amortization of $70 million to $75 million. We expect capital expenditures will be between $70 million and $75 million as well. Our year-end 2011 NOL carryforward is estimated to be between $200 million and $250 million. As I said during our October Investor call, we've been able to preserve most of our NOL carryforward position despite utilizing a significant portion of the previous balance against recently announced transaction gains. Lastly, our normalized tax rate for 2012 is expected to be between 38% and 40%.

Turning now to Slide 10. Here is our adjusted P&L statement for the third quarter of 2011.

The net sales line continues to show adjustments on a year-over-year basis that reflect the elimination of Axcess at Kohl's, as well as the changing mix of licensing versus wholesale revenues in the Partnered Brands segment, thus driving total sales down 10%. However, Domestic-Based Direct Brands net sales actually were increased 8% for the quarter. We have a very good adjusted gross margin story to report, up 352 basis points to 53.5%. We worked hard for this improvement to offset the significant cotton and raw material cost inflation that we faced in our going-in margins.

Adjusted SG&A was roughly in line with the year-ago numbers, with cost reduction in corporate overhead being offset by new store openings. We reported a $7 million adjusted operating profit, representing a 1.9% adjusted operating margin for the quarter.

Adjusted EBITDA was $28 million. Very importantly, on a pro forma basis, adjusted EBITDA was up $1 million over third quarter last year to $23 million. This pro forma adjusted EBITDA of plus 1 versus the continuing ops adjusted EBITDA of down 8 validates that we divested the underperforming assets and kept the growing ones.

Today's reported Q3 pro forma adjusted EBITDA of $23 million is right in line with our guidance of $20 million to $25 million we provided back in October, although the Street consensus for Q3 EBITDA is $41 million. This result keeps us on track to achieve our 2011 full year pro forma adjusted EBITDA of $80 to $90 million.

On Slide 11, you see the key third quarter 2011 balance sheet metrics. Note that Mexx has been adjusted out of all the metrics and time periods on this chart.

Accounts receivables were down 28% to $150 million. And inventories were managed carefully, down 7% to $256 million. I'll show you a more granular inventory bridge in a few minutes. Total net debt at quarter end, prior to the completion of the many transactions we've announced recently, was $736 million. With the already received cash proceeds from the announced deals and the expected fourth quarter working capital benefit, we anticipate year end 2011 net debt to be between $270 million and $290 million.

Now let's go through a quick summary of how we raised the capital to pay down our debt.

Since August 2011, we received proceeds of $471 million associated with the following transactions.

$58 million for the sale of trademark rights of certain fragrance brands, as well as a reduction in the future minimum guaranteed royalties and prepayment of certain royalties under license to Elizabeth Arden. This transaction was the only one of the 5 that was completed and funded in the third quarter.

The $268 million of the global trademark rights to the Liz Claiborne family of brands and the U.S. and Puerto Rico trademark rights for the Monet brand to J.C. Penney, in addition to an advance of $20 million in exchange for agreeing to develop exclusive brands for J.C. Penney in the future.

The next joint venture with The Gores Group whereby Liz Claiborne Inc. is now a minority interest holder and receives cash consideration of $85 million, subject to potential working capital adjustments.

And lastly, the sale of the trademark rights for Kensie, KensieGirl and Mac & Jac to Bluestar Alliance and Dana Buchman to Kohl's, for an aggregate total cash of $40 million.

And finally on this slide, CapEx for the last 12 months was $62 million. We estimate that fiscal year 2011 CapEx will be between $60 million and $65 million, excluding the purchase of the Ohio distribution center for $23 million. It is important to note that this also excludes 2011 Mexx capital expenditures of $15 million.

Now let me walk you through some important bridge schedules.

On Slide 12, you see the adjusted net sales bridge for the third quarter 2011.

As indicated before, the reduction in sales primarily came from 2 places: the model transition in the Liz Claiborne family of brands licensing; and the elimination of the Axcess business at Kohl's for fall 2011. Sales of DKNY Jeans were lower as well.

Domestic-Based Direct Brands sales were up $23 million or 7.5%, driven by strong sales in all channels at kate spade, as well as strong sales growth at Lucky Brand Jeans and our direct-to-consumer channels. The sales decline at Juicy Couture was primarily driven by declines in the domestic wholesale and direct-to-consumer businesses.

On Slide 13, you see the adjusted gross margin bridge for the third quarter.

Domestic-Based Direct Brands margin -- gross margin rate was up 15 basis points. Juicy Couture gross margin was down slightly. Lucky Brand was up slightly. And gross margin was very strong but down compared to last year at kate spade, primarily reflecting a shift in sales mix. The major driver though of the plus 352 basis point improvement in total company gross margin rate came from Partnered Brands, which largely reflects the impact of the shift to a licensing model at J.C. Penney, as well as the elimination of the Axcess business and the small DKNY JEANS men's business, both of which are margin dilutive.

On Slide 14, you see the third quarter 2011 inventory summary.

Inventory was down 7% to $256 million as all brand teams have been watching and maintaining their positions carefully. We, in particular, took a very conservative position at Juicy Couture, where inventory was down at quarter end by 24% versus last year. Increases in the inventory at kate spade and Lucky Brand were directly in line with their growing direct-to-consumer sales trends. Partnered Brands inventories were down 48% for the quarter, and we expect these levels to continue to decline in the 4Q '11 and 1Q '12 as we liquidate all remaining DKNY Jeans and Kensie inventories.

And finally, on Slide 15, you can see a summary of net debt, which is our total debt balance less cash on hand.

As I said, prior to closing the latest transactions, the quarter end net debt profile was $736 million. We anticipate net debt to be between $270 million and $290 million at year end. We expect to have $0 drawn revolver at year end and enough cash availability to ultimately settle the Eurobond in full. Also, embedded in this $270 million to $290 million year-end net debt is $78 million of convertible notes, which can be settled in cash, stock or any combination thereof.

That's it. Let me now turn the call back over to Bill to review our quarterly segment results.

William L. McComb

Thanks, Andy. Let me now highlight the performance from a segment level perspective.

Looking first at Partnered Brands, here on Slide Page 16, adjusted net sales were $82 million for the quarter with adjusted gross profit at $40 million. Adjusted EBITDA margin for the segment was up from 7% to 10% during the quarter, and adjusted gross margin was up from 41% to 48%. As we discussed earlier, going forward, this segment will look very different, with only the private label jewelry division, the QVC license and the Lizwear sales accounting for the segment results.

On Slide Page 17, in the Domestic-Based Direct Brands segment, net sales were up 7.5% to $313 million. Adjusted EBITDA margin was down however from 10% to 7%, driven by reduced gross margin dollars at Juicy Couture. Gross margin rate was flat at 55%, not bad given the tremendous IMU pressure from cotton and other commodities that we faced going into this quarter. Total sales for Juicy Couture were down 7%. They were up at Lucky Brand Jeans by 3%, powered by strong double-digit direct-to-consumer comps, and up 69% at kate spade.

In terms of store count, you'll recall we opened more than a dozen new Juicy Couture doors in the fourth quarter of 2010 that will anniversary during the next month, many of which were outlets. Lucky Brand has reduced its store count by 5, and kate spade LTM door count is plus 9. As Andy indicated, kate spade will be opening most of the new doors in 2012.

So that concludes our prepared remarks for this call. Now let me open up the lines to take a few of your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Edward Yruma of KeyBanc Capital Markets.

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Bill, in terms of the Juicy business, can you talk about, as we look to '12? I know you've got a new direction from a management perspective, new design. What should the cadence of improvement be from, I guess, a very high-level perspective?

William L. McComb

Well, I think the most important thing to direct you on looking back at how kate and Lucky made their important turns, and I'm seeing such incredible similar footprints as we go, it's retail first. 2012 is when we'll see a return in especially our full price specialty stores. We have a very strong and sustained strength in our e-commerce business there, which is an important brand vitality metric. But I think that it's about traffic returning to the full price stores. And that's really what 2012 was going to be, productivity gains there. What we saw at kate spade and what we saw in 2010 and '11 at Lucky Brand is that wholesale lags almost a whole year. I don't want to say a full year but just about, let's call it, 3 full seasons. The wholesalers want to wait and see what's working in the full price stores. They also tend to have a larger rearview mirror than the actual end consumer. And so I would tell you that seeing the business return starting in spring and getting stronger with every season. Again, as I said in my remarks, using Lucky Brand's 2011 is really good analog, I think. I mean, when Spring 2011 shift on January 15 and floor sets are up by the 20th of January, we -- right then, we started to see a positive comp trend. And some of that was made up by AUR going up and then UPT, units per transaction, going up. Conversion started getting stronger. We started seeing stronger traffic trends as the marketing began to work. That's kind of the cadence that you'll see.

Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division

Great. And one follow-up. Thanks for the long-term margin color guidance. In terms of timing around Lucky, how long do you think until you can achieve kind of those mid-teens margins you're talking about?

William L. McComb

If I gave you a straight answer to that, it would be guidance. And I don't guide beyond, at most, the next year's business. And so I wouldn't want to give you a number except to say that what we've seen here is these businesses, when productivity comes in, the profit flow-through is pretty dramatic. I mean, you've got a fixed cost base in the retail fleet that you carry. And what we know at Lucky was that we need to compound positive comps on positive comps to get there, and we're in year one of very strong double-digit comps. You're seeing the double digits actually go higher as the months pass, which is terrific. But we need to lap another gear of another good comp trend. So we will remain focused on productivity growth next year. But I'll never -- I'll give you what our vision and direction is in terms of how we ultimately think about constructing the margin profile of these businesses, but I can't give you a quarter or a year.

Operator

Your next question comes from the line of Casey Flavin of Hedgeye.

Casey Flavin - CJS Securities

Lots of moving parts here obviously in the quarter. Wanted to see if you guys could just give some clarity on this corporate overhead. You highlighted $70 million to $75 million for next year. And I guess, if we can start with just how much of that would you guys break out by brand? And if I recall correctly, you had corporate expenses previously fully allocated across the Direct Brands. And it looks like you're now pointing it out for both Partnered and Direct.

William L. McComb

No. Let me clarify, and then I'm going to give -- let Andy make some specific comments. That's not the right characterization. What we wanted to do embedded in what you see Partnered Brands and Domestic-Based Direct Brands are what you might call divisional brand overhead. So for example, over at kate spade or out at Lucky, they have finance people. And those numbers come out in the green bars on that page. What is in that red bar that is indicated at a run rate level now of $70 million to $75 million, which Andy gave you the direction that between now and the end of 2012, it will come down another $15 million, so that the run rate at the beginning of 2013 would be, call it, $15 million lower than what it's running right now. That's what we're calling corporate costs. So these are centralized and shared services, I could never etch it out by brand. They're shared services in areas like legal and corporate finance and corporate communications and corporate facilities, just to name a few. And ultimately, we do, on an activity basis, allocate it back into the businesses. What the purpose of showing you this is to show you what the EBITDA pools look like at what you'd call a brand divisional level. And Andy said importantly, we don't think that this is a better way to look at the business. We actually just think that by giving you, during this reset of our portfolio, one of the things that we said is one of our core initiatives for the next 18 months, with the new code that we're looking at right now, is to find better and more cost-effective ways to service the portfolio from this corporate center. We've been strapped with some tough legacy systems and processes and as all of you know, a level of complexity that has made it impossible to more meaningfully address the total cost and service footprint of this corporate group. Now we have the opportunity to do that and -- but the numbers that you saw in the green bars on that page do, in fact, have a level of divisional SG&A. Divisional SG&A is factored into the $20 million to $25 million in the Partnered Brands number, as an example. Andy, why don't you make some more comments?

Andrew C. Warren

Yes. The key expression, Casey, that Bill used there is the term shared services. The costs embedded in this corporate overhead are really there to service and provide, support further brands. So if you think in terms of -- we don't want every brand to have its own individual cost centers around payroll, around receivable management, around inventory management. A lot of that is done centrally, just a better cost-effective way to do this in a company our size. But yet as we get smaller, we clearly need to manage down and find productivity in those shared services as well. So I think they'll provide a lot of clarity but think in terms of the shared service centers that we're going to find productivity around.

Casey Flavin - CJS Securities

Got it. Now also, it looks like,, from a D&A perspective, you're running at roughly $75 million already, with the bulk of that up in the Domestic Direct Brands. The change you expect into next year, you got it to $70 million, $75 million. Can you just add some color there as to how you expect that to be allocated by brand?

Andrew C. Warren

Well, it will mostly be the Domestic-Based Direct Brands segment. If you look at what we said around CapEx, we're looking at really a 1 reinvestment ratio. Our CapEx next year is forecasted to be $70 million to $75 million in line with the depreciation and amortization. So think in terms of most of that being in the Domestic-Based Direct Brands segment and our investment, of course, will mostly be there as well.

Casey Flavin - CJS Securities

Got it. Okay. And then, Bill, can you just provide some color to us how -- I mean, essentially, how you're prioritizing internally there or balancing further cost reductions you guys have ahead of you and the progress you can make there versus the potential gross spending that you guys can be focused on, I guess, both near term and next couple of quarters here, but more importantly, from sort of the 12- to 18-month perspective as well?

William L. McComb

Well, you know what, as you digest some of the comments that we made, I think you'll see we answered those questions. I mean, we gave you a view on a 12- to 18-month perspective of where we see capital going and what our priorities are. You heard us say that our operating capital spending will be focused on new revenue producing growth opportunities at kate spade. I think that as we see Lucky Brand beginning to lap, its first year of comp door growth and productivity expansion will be ready to get back on the door opening path for that. And Juicy, I think we're going to hunker down for all of next year and just get back the productivity in the fleet that we have. With some exceptions here and there, such as -- I said that we opened on November 1, an incredible store at the Westfield London, which is off to a great, great, great start in one week, and that was an opportunity that, from a position in the mall perspective, was too good. And so in terms of cost reductions, I think also our comments really lay out very clearly how and where we're going to get at it. I mean talking about, we just finished a $25 million reduction in that red bar, in the slide deck on Page 8, that shows the $70 million to $75 million that we just discussed, that's down from -- that's down $25 million on a run-rate basis from where we were at the end of July. And we said we're going to go for another $15 million. There really aren't -- I mean, categorically, there really aren't cost reductions planned in the brands themselves. I mean, they're constantly redeploying cost and chasing opportunity. kate spade has been in an expansion mode. Lucky or Juicy has reduced its cost footprint all year long. We had 3 cost reductions there in resizing to the current business and getting more efficient. And the only other comment that we made that is sort of unaddressed that we'll be clear on is that we will have some operating capital spending over the next 12 months to help us improve our systems to take a whack at that $70 million to $75 million. Nothing scary, in terms of big, huge announcements about major systems platforms, but we can't get to that ultimate $45 million to $55 million cost footprint in those corporate allocated costs that Andy spoke to -- that goal, as a long-term goal, without making some systems changes. So like I said, you'll find more answers back in the transcript.

Operator

The next question comes from the line of Mary Gilbert of Imperial Capital.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Just wanted to follow up on the CapEx for next year, $75 million. How much of that is going to go into systems?

Andrew C. Warren

The expectation, Mary, is about -- cost $15 million and that's not only systems but supporting e-com as well. So we're very focused on that CapEx going towards revenue-generating assets, and certainly e-com is a big, big driver of that for us.

William L. McComb

And that said, we're on day one in terms of this transformation team that we put together that we've charged with coming up with unexpected ways of getting faster to the corporate footprint that we want. And so we could, in quarters that come up, talk about opportunities in capital spending and systems that take that number up. And we'll discuss how we'll fund it, what comes in and what comes out.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

So does that mean that, that number could increase? Instead of being $75 million, it could go up to $80 million? And have there been any particular named systems that you're looking at like SAP or something like that, that you could discuss?

William L. McComb

Oh, I'm sorry, could you repeat the question?

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Yes, like a particular system, like SAP?

William L. McComb

No, no, no. I don't think we're talking about something like that. I mean, that's a possibility and we've look at those things. I don't think that it's one big -- we have -- don't forget, this company was built on top of a wholesale corporation called Liz Claiborne. And its systems were cobbled together from legacy systems from all of the acquired businesses and brands. And there's some rationalization that needs to go on. There actually are some systems approaches that can actually bring down the operating costs in the brand SG&A, as well as at corporate. But I don't have any further direction except to say, you're hearing us at the CFO and CEO level give you -- we're sharing with you the goals that we have chartered our internal transformation team to go get. And we have some early visibility to what that could look like, and that's why we shared with you those longer-term targets.

Andrew C. Warren

And just to clarify and maybe add some metric around that, Mary. One thing for sure that we would insist upon and ensure happen is that any IT investment we had that would yield cost productivity would have a payback of, call it, one year or less. So we'd make sure that the goals we laid out here, the $45 million to $50 million of eventual corporate overhead goal, that payback in that investment would be very fast.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Okay, great. Yes, so when we look at that eventual goal of $45 million to $50 million, could that be 2014?

Andrew C. Warren

I wouldn't say yes and I wouldn't say no. I mean, I'm a guy that believes in stretched goals, so why not? But that's a trend. This is -- it would be a mistake to look at the $70 million to $75 million and say, "Well, that's low-lying fruit." They can go in and whack that out. I mean, we're better than that. If we could do that, we would have done it a year ago. So I think that the steps that we've shown you here, giving you an expectation or guidance, if you will, that the run rate going into 2013 will be in that $55 million to $60 million range.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Okay. Now when we look at the cash flow analysis, let's say, for 2012 based on the guidance that you gave us and kind of looking at the new capital structure, reduced debt, how should we look at average borrowings on the revolver? And I'm assuming, of course, working capital investment is going to increase. So it looks like you guys would be cash flow-neutral to positive and actually may be even slightly positive?

Andrew C. Warren

Right. Next year would have probably a range of utilization of $0 to $100 million, call it, so an average of $50 million. So much of this depends on the function of the timing of the debt repurchases, the timing of when we used the excess cash we're going to have at year end. But you're thinking through this right. I mean, that's the right approach and think in terms of $50 million average drawn revolver, with all that being working capital.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Okay. So that -- to the extent that there is any free cash flow generation, I just wanted to understand the management strategy here. Is the goal to redeploy any potential free cash flow into accelerating growth in the business? I mean what is -- or is there further debt reduction? I just wanted to get your perspective?

Andrew C. Warren

The 2 areas to focus on would be continuing to delever. I mean, that's clearly been a focus of ours. And we believe the $70 million, $75 million of CapEx, Mary, that we've outlined is the right level of CapEx to drive the growth. Again, the vast majority of that is going towards growing the top line, whether it be store, investment or e-com, et cetera. So I wouldn't say we would increase the CapEx dramatically. I think that's the right level for where we are today, and there has been a lot of ROI return on that.

William L. McComb

Yes, I mean, the timing of the Juicy turn and even the Lucky turn suggest to us that while we're being prudent and careful, we're not starving out any opportunities. This is now a growth, a sales growth and margin expansion agenda in this company. And I think Andy said it beautifully, we -- the answer to your question is both because we feel that in our 2012 business plan, we are adequately funding the growth that we can get and that we should be going for and additional free cash flow. We are going to stay focused on paying down debt.

Andrew C. Warren

We've been very diligent around making sure every investment has at least a 20 ROI. And so that $70 million, $75 million is not a capital constraint $70 million, $75 million. It's a maximizing return $70 million, $75 million.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

That suggests that you should be throwing off free cash flow 2013 and beyond.

William L. McComb

No comment. I mean, that's -- that you're an analyst and those are the comments you make and report.

Operator

Your next question comes from the line of Carla Casella of JP Morgan.

Carla Casella - JP Morgan Chase & Co, Research Division

You gave your goals for operating margin for each of the brands. Can you just say where the brands rank today if you don't give the exact operating margin for kate, Lucky and Juicy. Which are -- would be highest at this point and which should be the lowest?

William L. McComb

Literally, at the moment in time right now, kate is at the highest, Juicy is in the middle and Lucky is at the lowest.

Carla Casella - JP Morgan Chase & Co, Research Division

Okay, great. And then, how much of the decline in sales at Juicy has been from your own exiting certain doors or losing any doors?

William L. McComb

It's hard to -- first of all, your question was just a wholesale question. And don't forget the business is -- the business skews to direct-to-consumer. But within wholesale, we started winding it back in the fourth quarter of 2009. Certain retailers started pulling us back in 2010. And it's hard to tease out what is their decision versus ours. I mean, we've had and fueled a growing direct-to-consumer franchise. And in that was a strategic decision to dilute the sales run rates on the wholesale side. And so I don't think I can tease that out any further.

Carla Casella - JP Morgan Chase & Co, Research Division

Okay. And then as you see -- or I guess the response to Bird and the new brand, do you see it kind of regrowing from where we are now in wholesale even if it doesn't get back to pre-'09 levels?

William L. McComb

We definitely have a goal to not get back to pre-'09 levels there. We intend to let our vertical organization take those opportunities. We want a healthy and important wholesale business. Bird will be a contributor to that but frankly, so will base Juicy. But as I said in answer to Casey's question, I think that the wholesale -- the coming back at wholesale will be more of a late 2012, early 2013 story, just given the cadence of how that is a rearview mirror indicator. And that was how it worked at kate spade. And certainly it's how it's working at Lucky now, where we're now seeing real traction where the wholesalers have only recently adopted and deployed strategies that have now been working for 9 months in our retail stores. They're doing it now at retail and wholesale. And lo and behold, it's working the same way. And so I just -- I think that's the cadence of how this is going to play out next year.

Carla Casella - JP Morgan Chase & Co, Research Division

Okay, great. Then one financial question, on the asset sale proceeds, you mentioned that you have enough cash obviously now to take care of the Euro notes. Would you consider buying any of those back early or doing a tender like you did in the past or diffusing them, or can you just sit on cash and wait till maturity?

William L. McComb

Yes to all of the above.

Andrew C. Warren

Yes. We're looking at all options right now and considering them. And we'll let you all know kind of how that plays out. But right now, there's a lot of optionality we have with that cash and our goal is to maximize the value of it.

Operator

Your next question comes from the line of Kate McShane of Citi Investment Research.

Kate McShane - Citigroup Inc, Research Division

Bill, I was wondering if you could talk about what criteria you may be looking at to decide if you're going to partner or joint venture with international partners or go it alone with the global expansion or the eventual global expansion of kate, Juicy and Lucky?

William L. McComb

The only place that we're "going it alone" is specifically the U.K. market. And what you know there is that we have some wholesale presence at kate spade in London but importantly, 2 new retail stores, one in Sloane Square and one in Covent Garden, that we opened and we operate those directly. We also have a meaningful team at Juicy, a meaningful international infrastructure with the headquarters based in London at Juicy. And out of that, we're running the European wholesale business and the several stores that we have in the greater London area. And so I will tell you that when we go to London with Lucky, we will do that ourselves directly as well. Everywhere else, we're looking at partnerships. The principles are that we want partnerships and legal contracts and relationships that are win-win but also that gives us an option to eventually acquire the rights or bring back in-house, if you will, direct a team and with the incentives built in for the partner to make that worthwhile. And all of our deals do that. That's what has worked so well for competitors that we admire like Burberry and Coach and Ralph Lauren. And so that's how we're going to do it, whether you go -- only the bigger markets are the ones that we would talk about a joint venture. So it really has been Japan. It's been China. And there may be an approach on the continent in Europe, I'm not talking about the U.K., but on the continent where there is an opportunity at Juicy and kate spade to do actual joint ventures.

Kate McShane - Citigroup Inc, Research Division

Okay, great. That's really helpful. And congratulations on the comps with Lucky. I think it's even more impressive, given the mall traffic trends that we've been seeing. So I wonder if you could comment at all on the traffic versus conversion and ticket at Lucky, specifically, over the last 9 months?

William L. McComb

The brand has benefited from improvements on all of the metrics over the different 9-month period that we've had. When these businesses turn, like we saw at kate spade, it's usually the compounding of your most loyal customer comes back more often, they're buying more items in a given transaction, the conversion to tops. I mean, one of the great things at Lucky is that they're selling the most premium items in their line, and they've really de-commoditized from the -- when we dipped into the lower price points under $100. Now the customer is voting on innovation and newness and real design, and that's great. And it's -- the consistency is as strong as what we've seen at kate spade. It's across the brand. It's across the fleet. It's across the channels, with wholesale now just beginning to kick in as the wholesalers have followed those strategies. But I'm with you, Kate. I think it is very impressive. It is -- these are big numbers. This absolutely defies the trend out there, and we're -- it's not like there's just -- like we hit it with one good item. It's really the entire collection that's really performing, and the return of the women's business has been the key here. It really has. I mean, we've sustained a good strength in men's and that's great and -- but the materials innovation and the new silhouettes and shapes have really made a difference on the denim side.

Kate McShane - Citigroup Inc, Research Division

Okay, great. And then the very last quick question on your supply chain and sourcing. I know you now source through Li & Fung. I wonder with the new company, basically the new company structure, if there would be any changes to that arrangement or you'd be looking at...

William L. McComb

No, no, no. Not at all, absolutely not at all. I mean, this is -- we've gone through a lot of painful change around this place for 5 years. And we've got some things set up that are working, and it's a matter of growing from there. So we're not looking to make a change there.

Operator

Your next question comes from the line of Grant Jordan of Wells Fargo.

Grant Jordan - Wells Fargo Securities, LLC, Research Division

I appreciate the breakdown on inventory, but I just want to make sure that I'm understanding correctly with all the moving parts. The -- down 7%, is that fully apples-to-apples basis on products you're selling this year relative to last year?

William L. McComb

Yes, it is.

Grant Jordan - Wells Fargo Securities, LLC, Research Division

Okay. And how would you say that inventory is at your retail partners in the channel?

Andrew C. Warren

I think the retail partners have been buying conservatively. I think their positions are in line with the market today, which is good for all of us. So I feel comfortable with their positions and comfortable with ours.

William L. McComb

And by the way, the biggest adjustments that we've seen toward that have been on the international side, where European wholesalers have really hit the clutch or the brake depending on what your perspective is. They're in the middle of their own version of late 2008, early 2009, and there's not a lot of exposure over there. And anyway, wholesale is a small component of each of these brands to begin with.

Grant Jordan - Wells Fargo Securities, LLC, Research Division

Right. Just kind of a technical question, are you going to be able to provide us with quarterly restatements going back so we can kind of understand how to model the business going forward?

Andrew C. Warren

We are providing -- we have provided pro forma financial statements. We won't go through this level of specificity on some of these charts we have here, but we are doing some pro forma work. And going forward, you'll see a restatement of prior periods.

Grant Jordan - Wells Fargo Securities, LLC, Research Division

Like Q1 and Q2? Will you provide...

Andrew C. Warren

Correct. That's right. So when we report Q1 '12, we'll be restating Q1 '11.

Grant Jordan - Wells Fargo Securities, LLC, Research Division

Okay. But you're not going to provide Q1 '11 restated before you report Q1 '12?

Andrew C. Warren

Correct. No, we will not.

Operator

Your next question comes from the line of Jim Chartier of Monness, Crespi, Hardt.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

My first question, the brand margin information that you gave us before for 2011 was very helpful. Can you give us an idea of what you expect margins by brand to be in 2012?

William L. McComb

No. It's not a part of our guidance metrics.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Can you give a sense of where you expect the most margin improvement to come from next year?

William L. McComb

It's across the board. Actually, we're looking at margin -- we're looking at gross margin dollar growth at kate spade that comes with the business. And at Juicy and Lucky, we have a forecast for growth in those as well.

Andrew C. Warren

One of the comment to make, for the last 18 months, we've been talking about cotton and raw material inflation being a negative margin driver and hurting our initial markups. For 2012, it looks like that may be a good guy. We're definitely seeing some raw material deflation in some cases, particularly with cotton, so that may help our IMUs in 2012 versus '11.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

When would be the earliest you could see some of the positive impact from lower raw materials?

Andrew C. Warren

In the summertime.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

And then, can you tell us what the impact of the shift in Lucky wholesale revenue from third to fourth quarter had on your third quarter sales and your domestic direct operating margin?

William L. McComb

Not at that granular level, but we called it out as a soft spot in margin. And that ties with -- as I said, they just have been -- they've just been lagging on waiting to see. And they now sort of have the religion and they're kind of going along with it now, and they're seeing some good results. But it wasn't as -- they didn't get with it as early in the third quarter as we thought they would and had planned to.

Andrew C. Warren

And the key thing with Lucky is to fully understand what a great direct-to-consumer sales comp and margin story we have today there. And so as Bill said, wholesale is a lagging channel relative to where we are with direct-to-consumer right now.

William L. McComb

As it will be at Juicy next year.

Andrew C. Warren

Yes, right.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Okay. I was just surprised to see the Domestic-Direct operating margin down 300 basis points. So I was curious what the drivers behind that were other than Juicy margin being down.

William L. McComb

Yes, well that's -- it's more that than anything.

Andrew C. Warren

And you've got to remember, though, that this is right now the high point of the IMU pressure. In the third and fourth quarter, this is when IMUs were most affected by raw material inflation. All the cotton trends and articles and discussions we've had as an the industry the last year, the apex of that is literally right now. And so the IMUs had been most affected by that.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Okay, that helps. And then, can you tell us what Lucky wholesale bookings are for spring in aggregate?

William L. McComb

No, no.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

I just needed...

William L. McComb

I mean, honestly, I don't have them. I don't know them in front of me.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Are they up double digits or single digits?

William L. McComb

I don't know.

Andrew C. Warren

And even if we did, we wouldn't provide that right now. I mean, that will be a...

William L. McComb

We'll give you -- you'll get more on that in the next call.

Andrew C. Warren

That's a very granular kind of forecast to have.

James Andrew Chartier - Monness, Crespi, Hardt & Co., Inc., Research Division

Okay. And finally, what percentage of Juicy sales are from international, and then how fast has that business grown?

William L. McComb

It's in the 18% to 20% range, and it's been a momentum in growth segment. As I said, in this last quarter, we've -- Juicy has seen some exposure, honestly, to Europe. We've got a very strong business in Greece that has slowed very quickly, understandably, and -- but we're working with our partner there to ensure that we don't ship too much products to a market that ultimately can't sustain it. So international shipments were soft for the quarter because of that, but it's been 18% to 20% and growing and will continue to grow fast.

Operator

Your next question comes from the line of Jennifer Black of Jennifer Black & Associates.

Unknown Analyst -

This is Carla White standing in for Jennifer Black. I just want to ask a couple of questions. Can you talk about how the refreshed Juicy stores are doing versus the slate? And then, your early response to your holiday accessories at Juicy and is this category you can chase?

William L. McComb

Okay. Two good questions. I said 2 comments in my remarks regarding the Juicy stores. We just finished what we call it the re-couturing of the Juicy stores, exactly what we did at kate spade, exactly what we did at Lucky Brand. These are -- this is a stunning redo of these stores. We also opened a flagship through our partner, ImagineX. We opened a flagship in Beijing, which I just saw last week when I was over, and one in Hong Kong at Harbour Place. And I can't give -- Carla, I can't give you actual numbers because numerically, I would have to have the team do a bunch of validation. But I'll just tell you that I can see sort of qualitatively -- well, I can see it quantitatively, I just can't give you an average number. But after we do a store, we see the comp trend change and in a meaningful way. But I'm hedging here because we are 7 days into it. Honestly, 7 days, and we also opened the Westfield store, as I said, on Monday of this last week. So both sums look up. We’re excited about it. If you -- one of our customers couldn't walk by the front of the store without stopping and saying, "Wow, that looks different." And in earlier presentations here, there are slides out there on Investor Relations that show what the goals of the redo are. So that was your first question. Your second question was about Juicy accessories for holiday. We have an incredible gifting program that's just now shipping to stores. And while, no, it's not something that we can chase. I mean, they're long-lead orders. We have it as a really big and important part of our holiday sales profile. And I had said earlier before that we missed this last year. In the management transitions that went on, holiday gifting was not done as it had been done in earlier years. So we went back to that. We have a great program. The accessories right now that are there are turning well. I mean, I'll make the comment that I've made before. It's going to frustrate people, but when -- where Leann has gone in, and on short lead times, pushed items that are on trend, we have high and fast sell-throughs. The key is to have a whole line work bought with the right densities, displayed the right way. And that's -- the start of that is spring. We had a fashion event in New York last Thursday night for the bloggers and the long-lead editors, and we've been very, very happy. There are a lot of blog articles out there. You can go out and see what their reactions to the collection look like but -- from a early view fashion perspective, it's been very, very positive.

Unknown Analyst -

And then, can you also talk about your visions for Juicy and the lines you are focused on, like growing Bird, intimates and any other concepts?

William L. McComb

Well, I think I owe you clear answers to that after we proved that we're back on our feet with the core line. But we've talked that we've -- in the past, we've talked about the opportunity to really do intimates. We've done lounge wear and we had called that intimates, and lounge wear is a category that does really well here. I will still tell you that the biggest call out that I'll make overall is really is getting Juicy back on the track for an accessories penetration just over 50%. I like the margin profile of that business. I like the sustainability of it. I like that shopper a lot. And Juicy has had the credibility to do that. We've had -- our accessories business has been in the 40 to low 40 percentage range, and that right there says we could do it. I think Leann's -- I think her priorities are right in line here. Bird is really a fall 2012 opportunity for the line to really come together better. She's got some big ideas on that. But again, that's still small. I mean, for the investor world, I will call out that what really matters is just getting the core brand turning again and matching it up to what we know the likability and desirability is with the broad consumer base. So that's job one. But in China, for example, on this last trip that I just made, we're spending time looking at that market saying, "Juicy is so popular in China as a phenomenon." Are there categories that should lead development in China? I mean, our I think our kids business can be even bigger over there. So those are things that I promise to give more clarity and traction around. As I said, the beauty of all of these changes is that we are now a -- what I will call, a growth-oriented and margin-expanding company. So these are all the things we're going to talk about.

Unknown Analyst -

You've done a great job with adding categories at kate. Are you adding any additional categories or any thoughts on intimates in girls? And then, how many potential licenses do you think you could have there?

William L. McComb

I don't know about the licenses. I mean, we have those now. I mean, we have a baby and a baby license. We do kids ourselves. We have -- we do intimates ourselves as well. And so I think your point is well-taken. Our first focus at kate was getting the core business on track, then we launched jewelry, then we launched apparel. And now we're going in a meaningful way into some of these other categories. So I think that you will see us do play that same kind of brand expanding playbook. Michael Kors has done it very well. I think that that's the kind of path that you'll see Juicy follow as well. I mean, we certainly have had -- you know that one of the bigger questions I get is, will you ever go back into the men's business? And it's interesting that a lot of the fashion-focus people say, "gosh" -- I mean, a lot of the women say -- the "it" girls say they loved buying that pieces of the line for their boyfriend. All of that is stuff to be considered, but job one is to get back to the core business and get it turning the apparel and handbag business, getting it growing again.

Unknown Analyst -

And then my final question is, can you talk about your outlet business for all 3 brands and are there changes you are making and what kind of opportunities do you see there longer term?

William L. McComb

We're really happy with the business. This Is one of the stories where we turned what was a foundational strength in real estate from the old Liz Claiborne outlet days into a portfolio of outlets that are sized right and run by the brands themselves. And it is -- it remains a very important lane and in terms of that the value consumer is hungry and active and profitable. And I think that we've sized those portfolios right. We run them very, very well. They're all on-brand, brand-right and they're tiered appropriately versus the full price specialty stores. And so other than giving you the kind of direction that I gave in the first 5 charts that I did on the call, where I talked about how big the businesses can be where I gave some direction. Lucky, for example, having a real outlet expansion opportunity. Juicy, I don't think the opportunity is to expand outlet so quickly right now because we've done that. That was part of our store expansion last year. And kate is -- the outlet will grow in proportion to full price. So we're happy we have. It's a really important piece of the business. We do it right. It's a brand-right. We like the locations, and it will continue to play a proportional role.

Operator

We have time for one more question and it comes from Robin Murchison of SunTrust.

Robin S. Murchison - SunTrust Robinson Humphrey, Inc., Research Division

A lot of my questions have been answered. I will ask you one thing though. When you talked about the international markets and you indicated that international is undergoing sort of a late '08, early '09, sort of a replication of what we went through, can you segue your comments in between, say, Southern Europe and Northern Europe? I mean, clearly, I would assume that you're seeing better performance out of Northern Europe, and your Juicy comments in London are not lost on me. But I just wondered if there's anything else you can say, maybe even through the lens of your ownership of -- residual ownership of Mexx?

William L. McComb

Most of our footprint is -- well, for Juicy, it's mostly Southern Europe. And so -- and by that, I mean, south of Paris and France and I mean, Italy and I mean, Greece, where the business is big, and Spain. And so they definitely -- the wholesalers are just definitely taking the same kind of conservative view of receipts that we saw here back during that time and it is to be expected, and it's the right and smart move. I will tell you a residual comment from Mexx. I think it goes pretty much the way that you would expect it to go. I mean, Germany, overall, in the marketplace aggregating market comments. Germany is stronger than the rest but definitely, there's been a market-wide slowdown over there in Germany. And the North is definitely a little bit stronger. But right now, there's so much uncertainty over there that there's definitely a mild pulling back.

Okay, guys, thank you so much. Thanks for dialing in. Thanks for your questions and your interest. We look forward to providing more reports in the future on this exciting new portfolio that we have. Take care.

Operator

Thank you. This concludes your conference call. You may now disconnect.

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Source: Liz Claiborne's CEO Discusses Q3 2011 Results - Earnings Call Transcript
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