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Executives

William L. McComb - Chief Executive Officer and Executive Director

George M. Carrara - Chief Financial Officer, Chief Operating Officer and Executive Vice President

Analysts

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

Jennifer Black

Corinna L. Freedman - Wedbush Securities Inc., Research Division

Kate McShane - Citigroup Inc, Research Division

Casey Flavin

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Janet Kloppenburg

Robert S. Drbul - Barclays Capital, Research Division

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

Liz Claiborne (LIZ) Q1 2012 Earnings Call April 26, 2012 10:00 AM ET

Operator

Good morning, everyone, and welcome to the Liz Claiborne First Quarter 2012 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 this requirement. 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 qualification set out in this morning's press release, as well as in the company's 2011 annual report on Form 10-K under the captions Item 1A., Risk Factors and statement regarding forward-looking statements and this first quarter 2012 Form 10-Q under the caption statement regarding forward-looking statements each filed with the SEC. The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise. Also please note that during this call and in the accompanying slides and press release, sales, gross profit, gross margins, 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 comparable 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 its 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 first quarter of 2011 and quarterly and fully year periods in 2011 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 thank you for making time to listen to our report on our first quarter 2012 earnings results. We're presenting today with a slide deck as we usually do, that's available out on the website in the Investor Relations section. And joining me today is our new CFO and COO, George Carrara. George is off to a very strong start here now in week 4. Our company has given him a warm welcome and he's learning our business and already actively leading our corporate transformation work.

Today's call will be brief. I'll offer some overall perspectives on the quarter. I'll review the direct-to-consumer comps, and George will summarize the financial highlights from our earnings report. We'll then field some questions.

Overall, we're pleased with the sales and earnings performance during the quarter. Within the brand, we posted very strong growth at Lucky Brand. We posted a strong trend again at kate spade. And Juicy Couture shows positive responses again to new product and marketing, despite posting negative comps.

The reported adjusted EBITDA of negative $1 million met our expectations and we remain on track to deliver the guided 2012 adjusted EBITDA range of $125 million to $140 million, excluding unrealized foreign currency gains and losses. We're highly focused now on rationalizing our corporate expenses while also investing for the efficiency that will deliver the most effective and lean corporate infrastructure possible.

And finally, in terms of overall perspectives, as we've said a few times in response to press generated inquiries, we continue to have no plans today other than to run this business and deliver the growth and earnings expansion that we've been working hard to unlock over the past few years. We're bullish on our future, on our brands and on our people.

So let's have a look at the first quarter. Turning here to Slide Page 3, you'll see January, February, March and first quarter total comps. We gave you a peek at February to date back on February 29, when we reported year end 2011 results. kate spade posted a total direct-to-consumer comp for the quarter of plus 38%. While February was in line with our guided comp range, March posted very strong results at plus 73%. Month to date in April, kate spade comps are up strong double digits again.

And as I said before, Lucky Brand is posting very strong sales growth. Total direct-to-consumer comps in February were up 20% and March registered up 18%, with a total quarter at plus 21%. April to date comps are posting right in line with our forecast and up against very high levels a year ago.

And at Juicy Couture, the quarterly total direct to consumer comp was down 4%, down 2 points in February and down 3 points in March.

Let's flip to the next page to take a deeper look at each of the brands, starting with Juicy Couture. Here on Page 4, you can see the first quarter performance summary for Juicy Couture. Net sales across the channels and geographies were down 4%. Direct to consumer comps, as I said, were also down 4% for the quarter as well.

Here's what we see going on at Juicy. Apparel is really working. In the first quarter, spring and summer season apparel posted a plus 15% total direct-to-consumer comp on inventory that was on average during the period down 24%. The new fashion items are selling very well, comprising the strongest, single category comp in the store. These are the advertised items and the ones that are signaling a new look for Juicy Couture.

Although improved, the newer spring and summer coded accessories are not working quite as well as the apparel. Total direct-to-consumer comp for the first quarter was plus 9% on inventory that on average was down 5%. Our U.S. wholesale partners are reporting similar trends between apparel and accessories.

In addition, our partnered businesses in Asia and the Middle East are very healthy, posting sales growth of plus 42% during the quarter. And finally, the very light inventories of new goods continue to impede the overall comp level just as they did back when we reported in February. Here's how it goes. We deliver new goods to the store. We post very strong sell-throughs and positive comps for a little more than a week, then the inventory thins and we lose conversion. Comps go from strong positives to quick negatives as the apparel items sell out. In fact, April month to date with the Easter shift is down approximately 10%.

Despite the impact of our overly conservative inventory approach that we took for the new direction this spring, we're really happy with other important leading indicators on the business, beyond just the apparel comp that I mentioned. Specifically, the reactions to fall and holiday product from our store management and international partners, the store reports on the inquiries and responsiveness of the consumer in reaction to advertising and marketing, and the fashion media's reaction to the new lines and the subsequent editorial coverage of the brand, all very good.

Looking forward, we're still forecasting a strong trend break for the second half, as the composition of inventory and depth of buys catches up with the demand levels. Leann Nealz, President and Chief Creative Officer of Juicy, is also much happier with the accessories products that we're now presenting for holiday 2012. We still believe that accessories can and will be a strength for the business when we get it just right, still aspiring to eventually show penetration in accessories of just over 50%.

As you know, Dave Bassuk joined us February 27 as Co-President and Chief Operating Officer at Juicy Couture. During his tenure, I began relying on Dave to help us at corporate on some critical projects around the brands, project work that will directly enable the cost savings and efficiencies that we've been describing and efficiencies that George is now leading. As these projects will be taking on more importance over the coming months, Dave has indicated to both Leann and me, his desire to focus on these efforts. To help Fifth & Pacific effectively accomplish them, he feels the best platform to do this is as a consultant, working with us across brands. Given this focus, Dave will return to help run the retail practice at AlixPartners while partnering with Fifth & Pacific on our corporate transformation. While this is a bit unusual, it's a highly pragmatic move for Dave, AlixPartners and Juicy. Given our relationship with Dave and AlixPartners, we'll continue to leverage them in a number of roles going forward. As we make this transition, we will not be replacing the Juicy Co-President role imminently.

Turning now to Slide Page 5. Kate spade reported a 46% increase in total net sales for the quarter to $86 million. Productivity of the retail fleet is now averaging nearly $1,000 a square foot over the last 12 months. The brand registered strong growth across the categories. For domestic direct to consumer, apparel was up 21%, handbags up 41%, small leather goods were up 43%, and we launched watches successfully in mid-March to a very strong customer acceptance. The watches are done internally, not licensed, and we believe it can be a very big category for us. And within the apparel number is a big win in women's denim bottoms, a strong performer especially as we color-multiplied that successful item. We believe this shows the unique strength of this brand.

As we've said, our comp forecast for the year of high teens reflects our belief that getting substantially above the $1,000 per square foot mark will be increasingly difficult. Comps will grow again as we expand the comp door base. During the quarter, we added 8 new stores. Growing non-comp revenue is now the key priority for us within this brand.

On Page 6, you can see the performance summary for Lucky Brand. Operations, marketing and merchandising just keep getting better at Lucky Brand. If you're still wondering what it is that's driving these incredible result, you can start to understand it by studying how the marketing has evolved.

The brand has added a sophistication to its Southern California casual styling. The consumer can see an aspirational elevation. But it isn't just marketing, it's brand vision, and it's showing up in the product, in the in-store experience, the assortment changes, it is evident through every aspect of the brand. Add to that, the innovation in fabrics and cuts and the novelty and on-trend fashion elements that Lucky for years missed out on and you have a very hot brand trend.

Through this team's hard work and operations in sourcing, Lucky Brand posted improvements in productivity with higher margins and higher comps on much leaner inventory positions. Comp sales for the first quarter were up 22% in our specialty and outlet stores while inventory units were down on average by over 10%, in total delivering a gross margin expansion of nearly 400 basis points.

Denim, which has received the greatest overall focus in the past year, is continuing to deliver big gains. But the consumer is now also buying tops and accessories, too, and layering across the line. In our specialty stores, we saw during the quarter, a positive 33% comp in women's fashion with categories like wovens, knits, sweaters and tees, delivering very high positive comps.

The outlet stores are also now performing like the specialty fleet with a stronger product offering and innovation, better in-store marketing and higher initial margins on product. The team has also finished the long process of rightsizing inventory levels in this channel. We believe that this is a great business and an important future growth opportunity for us.

The wholesale business is now stabilized and can grow in healthy proportions. Complementing the core product line in wholesale will be an expanded plus size offering, Big and Tall line in men's and we expect to announce a domestic children's licensee for spring 2013 very soon.

As of the end of first quarter 2012, on an LTM basis, nearly 80% of all of the stores in the Lucky Brand U.S. fleet had a positive four-wall profit margin and of those, nearly half of the Lucky Brand U.S. fleet had four-wall profit margins over 15%. We will see tremendous operating leverage in this metric with every increment of productivity. That's the name of the game at Lucky right now. There are only a few stores with truly problematic lease structures. In the march to a total operating profit margin at Lucky Brand in the teens, watching this productivity number tick up, is key. A fleet four-wall average above 20% is our goal. This story is similar to what we saw with kate spade when it went from around $350 a square foot to its current levels. In 2012 we plan to open 4 specialty and 6 outlet Lucky Brand stores.

Turning now to Slide Page 7. Reported results in the Adelington Design Group were impacted by transitions to new operating models. Let me explain. First, the quarter reflected the impact of cleaning the existing channel of Monet jewelry as we prepare to move from traditional department stores into the new ownership structure at J. C. Penney. To remind you, that brand is now owned by J.C. Penney in the United States, but the Adelington Design Group will remain the exclusive design wholesaler and manufacturer of jewelry for that brand. So this quarter shows the impact of minimal sales at the beginning of the year as we transition to the new Monet business model, which launches at J. C. Penney in August of this year.

Similarly, the reported results in this segment were also negatively impacted by the final clearance activity related to our exit of the DKNY JEANS license. We reported some sales in liquidating final inventories at margins even lower than planned. These effects are factored into our current adjusted EBITDA guidance range. To remind you, the Adelington Design Group has wholesale sales for Monet and Liz Claiborne jewelry to J. C. Penney, wholesale sales from Dana Buchman jewelry at Kohl's, as well as other design and sales agreements on privately marketed brands. This segment also reports results for Lizwear, Trifari and the QVC license for Liz Claiborne New York. Given the numerous merchandising and pricing changes J. C. Penney is introducing right now in their stores, there is a range of sales and profit scenarios still for this group for the rest of the year, which we have included in our current total EBITDA guidance range.

Let me now turn the call over to George Carrara to briefly review the adjusted P&L and key financial performance metrics. George?

George M. Carrara

Thanks, Bill. Good morning, everyone. I look forward to meeting many of you in the weeks and months to come. As most of you know, I joined the company just a few weeks ago in April 2, and it has been a quick and very natural acclimation process, given my past and most recent industry experience with a global multichannel fashion company. In any event, let's continue with the slides.

Slide 8. This is our adjusted P&L summary for Quarter 1. This slide has 3 columns. The first 2 columns represent our first quarter adjusted results from continuing operations for 2012 and 2011, respectively. The third column reflects our first quarter 2011 comparable adjusted operating results, which exclude the estimated operating impact from brands that were sold or exited but were not part of discontinued operations. For example, the Liz Claiborne royalties from J. C. Penney and the DKNY JEANS license wholesale business. Additionally, with respect to the appendix, you should note that we have included similar, comparable adjusted data for Quarter 2, Quarter 3 and Quarter 4 of 2011. You should find this quite helpful in refining your models.

Column 1. Adjusted net sales for the first quarter were $318 million, up $41 million or 15% versus last year against the comparable brands in 2011. As Bill mentioned earlier, this increase is principally driven by double-digit sales increases across virtually all distribution channels of kate spade and Lucky Brand. This was offset by a 4% decrease in Juicy Couture sales.

Adjusted gross margin rate was up 110 basis points to 56.6% versus the comparable gross margin last year. It is important to note that all 3 of our premium brands, kate spade, Lucky Brand and Juicy Couture, experienced margin rate expansion during Quarter 1. This is the result of our improved marketing and positioning initiatives as well as improvements resulting from strategic sourcing actions, tighter buying and a continual redeployment of our focus to the higher-margin DTC business. Our margin increase is particularly noteworthy in light of the 15% aggregate sales increase of these 3 brands, principally in a highly promotional U.S. region and given higher raw material and labor costs compared to last year.

Adjusted SG&A was up $24 million for the quarter versus the comparable spend in the first quarter of 2011. This year-over-year increase of 13% is primarily attributable to increased marketing, function of both timing and a planned deeper spend aligned with product initiatives, as well as an infrastructure investment to enhance our business model in high-growth channels and to support expansion into new geographic regions. Although we are comfortable with the merits of the Q1 expense delta, we fully recognize that our overall operating expense base is at a level that is well above the industry average. In 2011 and prior, various initiatives were undertaken to better align certain supply chain and facility costs with sales levels. This work has continued into 2012 as well. I am drawing on my prior experience in this area and adding to the team's ideas to support our corporate transformation process.

Now to complete the slide. Adjusted EPS excluding unrealized foreign exchange was negative $0.21, $0.02 better than our comparable result last year, and adjusted EBITDA was negative $1 million, $3 million better than the comparable result in Q1 2011.

Flipping to Slide 9. As introduced in the fourth quarter, this chart presents a breakdown of our adjusted EBITDA in sales by brand along with a view into our corporate overhead component. Also on this slide, we are showing comparable results for first quarter 2011. Walks we provided in the fourth quarter from GAAP operating income to adjusted EBITDA are still provided in the appendix of this presentation in addition to similar walks for quarters 2, 3 and 4 of 2011. For Lucky Brand and kate spade, adjusted EBITDA improved year-over-year as a result of the sales increase as shown on the slide, partially offset by the SG&A investments I just reviewed. Juicy Couture adjusted EBITDA has declined as sales have decreased year-over-year on a significantly lower inventory base as we have very conservatively bought the newly designed product. In fact, it is important to note that our average aggregate Juicy inventory levels during Q1 were down 18% versus last year. This has been a key factor behind our Q1 sales pullback.

During the second half of 2012, our buys are planned at more demand appropriate levels. And as a result, we continue to forecast an improvement in second half Juicy sales trends. This assumption is incorporated into our full-year guidance. Additionally, the acceleration of marketing expenses also impacted Juicy Couture adjusted EBITDA. And Bill already explained the year-over-year decline in Adelington Design Group sales and adjusted EBITDA.

Lastly, corporate adjusted EBITDA is flat at a negative $20 million for the quarter. However, we are forecasting a reduction in the quarterly run rate throughout this year. As mentioned earlier, we continue to make overhead reduction and aggressive initiative across the corporate areas and are tackling on a more surgical basis within the brands. In any event, we will share more information in subsequent quarters regarding system strategies and any additional restructuring steps required to help right size our infrastructure.

Now to Slide 10. Slide 10 is some selected balance sheet and cash flow data. Please note that Mexx has been adjusted out of all the metrics and time periods on this chart. Accounts receivable are down 38% to $92 million, showing the impact of wholesale and licensing operations exited and sold later in 2011. All in all, we are comfortable with the quality of our receivable balance. Inventory is down 13% to $177 million, also showing the impact of the sold and exited brands. On the next slide, we'll take a deeper dive on inventory at the brand level.

Next, Total Debt. Total debt was $317 million as compared to $698 million at the end of Quarter 1 2011. This principally results from the utilization of cash proceeds of $471 million, primarily from asset sales during the trailing 12 months. It's worth noting that we did not have to draw upon our revolving credit facility during the quarter and are ending with $256 million of availability. The net result is a much healthier financial position which was positively recognized recently by both Moody's and S&P. After the quarter ended, we further strengthened our capital structure through the exchange of $23 million of our convertible bonds into 6.5 million shares on April 3, 2012, a transaction that is not reflected on our quarter end balance sheet.

And finally, CapEx. CapEx cash spend for the 12 months was $78 million. This LTM measurement will remain consistent for full-year 2012.

Slide 11 provides additional insight into our inventory levels. Total inventory, ex Mexx, was down 13% to $177 million. However, if we look at only comparable brands, total inventory was down 2% versus first quarter 2011. kate spade continues to invest in inventory to keep pace with rapid growth and has been able to do so successfully while maintaining high margins across all channels. Juicy Couture's inventory has decreased a significant 14% versus first quarter a year ago. This was in line with a conservative buying strategy. Now with the spring 2012 merchandise gaining traction, we have prudently invested it in inventory for our second half this year. The Lucky Brand inventory levels have decreased year-over-year, even though sales and gross margin have expanded significantly, highlighting the much enhanced assortment and effectiveness of our marketing strategy. Adelington Design Group inventory is lower, given the exit of various lines within this segment.

And finally, Slide 12. I'll update and reconfirm with you the few metrics we shared earlier that are embedded in our financial outlook for 2012.

As Bill indicated, we are reaffirming our adjusted EBITDA guidance for the year in the range of $125 million to $140 million, excluding impact from unrealized foreign currency losses. In terms of the projected distribution of 2012 EBITDA by quarter, we expect that such will be substantially similar to the 2011 quarterly EBITDA distribution shown in the appendix. Incorporated within this range, you can see full-year comps for Lucky Brand in the low teens, kate spade in the high teens, and Juicy Couture roughly flat for the first half and then 10% plus for the second half. And at the same time, we are narrowing our forecasted corporate overhead adjusted EBITDA component to approximately $75 million. We are expecting depreciation and amortization in the range of $70 million to $75 million. Our planned capital expenditures are approximately $75 million for the year. It is important to reiterate this excludes any investment spend that we deem appropriate to help in our cost transformation initiatives that will, of course, have significant expected ROI attached to them. As mentioned earlier, we will share more details on these initiatives in subsequent quarters.

We have added our interest expense projection this quarter. Based upon our current debt structure, we expect interest to be between $45 million to $50 million for the year, including approximately $11 million of noncash interest. Our normalized tax rate for 2012 that will be applied to our adjusted earnings will be between 38% and 40%. And lastly, our forecasted 2012 basic share count, including the weighted average effect of the April 3, 2012 convertible note exchange, is now 107 million shares while our diluted share count to calculate EPS, taking into account the dilutive impact of the remaining convertible bonds, is now 121 million shares.

That's it for the slides I will be reviewing. So with that, I'll turn the call back over to Bill. Bill?

William L. McComb

Okay. Thanks, George. I have to say publicly here how quickly your are learning the business and what a great partner you've already become. I'd now like to open up the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Edward Yruma of KeyBanc.

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

First, I guess I just wanted to understand a little bit behind the Juicy operating margins. Obviously you had some good things to say with some of the response to your products, but there was some pretty meaningful deterioration there so. Was that driven by a higher SG&A in the business? Or if you kind of walk us through some of the puts and takes there?

George M. Carrara

This is George. Yes, it was driven by a higher SG&A, principally the result of timing in terms of marketing.

William L. McComb

We spent more marketing in the first quarter, which was absolutely important to the 2012 and '13 plan. And we're happy that we've done it. It's kind of what we did. Once we saw traction at Lucky Brand, we did the same thing. And that's largely it, obviously a little sales de-leveraging, the minus 4% in total net sales. But there's your answer.

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

Great. And on Slides 20 and 21, thank you for providing some of those brand financials, I noticed that the corporate cost in allocations bucket for kate spade went up pretty meaningfully year-over-year. Were there kind of onetime cost there? Or I'm trying to understand kind of the overall direction of the corporate cost bucket.

William L. McComb

Well, it's -- look, I think the cleanest answer to that is, it's one of the reasons that we began breaking out EBITDA by brand and separating out the pre-post corporate allocation issue because, don't forget the allocation base actually changed as we eliminated the substantial part of the revenue base of the company. Now in saying that, what I'm, I guess the fact I was saying is, there's a higher allocation of a given amount of corporate cost to each of the brands. But I don't want to confuse you in saying that. We've been incredibly successful in my view, at taking out stranded cost that has been associated with each of the businesses that we've divested or no longer report in as part of our company. But some components of that are fixed and while it is a major theme here to take down the overall corporate cost and bring them in line with industry averages as George talked about, we're going to need to invest to do that and there will be sort of a stairway to heaven over the course of the next 2 years. And we've -- Andy and I in the last 2 calls related to that, and George just gave you some good call outs there. Remember that last year we had a $25 million cost out. So in fact, corporate costs are coming down. The actual allocated amounts of the remaining 3 brands goes up as there's a smaller base of brands to allocate them to. But the bigger thing that we're tackling is the actual base of cost itself. Anything to add to that, George?

George M. Carrara

No, I think you got it. I think the Mexx, the exit of the Mexx and within Adelington, some of the brands that were exited, of course smaller base of allocation, are relatively similar although reduced base of overhead to push down.

Operator

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

Jennifer Black

I wondered, Bill, if you could talk a little bit about your approach to broadening your demographics at kate? Have you made any changes to sizing or fit specs and will you be offering sharper price points on for that younger customer? And then I also wondered if you are considering adding little girls for plus sizes?

William L. McComb

Okay, really good question. In fact, one of the things that I would tell you, we got a lot of questions after that last call where we showed a softer February and many people said, look, what's going on there? I think in general, one of the things you've seen us do over the last 3 years on this brand, is we're playing to our core, which is over 30 years old. But we have a project -- we internally call it Project 80, and that refers to women born in the '80s -- in the 1980s. And specifically, we're talking about those in their '20s. That's a really important demographic that we want to increase the appeal and relevancy of the brand. And that our team is doing an absolutely brilliant job on it. The February floor set and the marketing that supported it was absolutely skewed to drive more of those young women into the store. And while the overall comp was softer, I will say there's a little bit of a recognition on our team, that it actually played very well to that younger demographic. In fact, they scored some meaningful wins in adding names to the database and further penetrating that younger audience. And that February floor set was probably a little more polarizing to the core older target. And even though that plus 19 delivered on exactly what we had forecasted for the business at that time, what the team has sort of concluded is they want to be able to bring in that 20 year plus consumer and not be quite so polarizing to the core customer. And we saw that in March. March actually did a pretty good job of that. I'm pretty pleased with what the team's come up with for the rest of year and how that should perform against both of those. They haven't resized the line. They've had a sizing and fit initiative for Asia because our business in Japan is so big and so strong and that's always a call-out when you translate North American produced goods into that market. But there hasn't been necessarily a fit profile change on that. They have all along been doing things to do, to introduce sharper price points but we've seen AUR go up at kate spade and we've seen even that younger customer -- I wouldn't characterize her as looking to be more price sensitive, at least not the one that kate spade is targeting. Their 24 year old target audience in that subset under Project 80 is not, they're not going for the Forever 21 girl. Yes, she may go in there and she may buy some fun things to spice up what she's currently doing. We know the consumer in every segment is high-low these days, it's just the way that it is. But kate, even for that younger audience, is an investment brand. She goes there to get really great, really on-trend, brand-new, super stylish statement pieces. The other question that you asked, Jennifer, was on kid's and girl's and what we know is absolutely a call-out from our customer, both our trade customer, our wholesale partners, our international partners as well as consumers. Mom's say "Oh my God, this would translate beautifully." It's on our strategic initiatives dashboard but we haven't advanced that initiative in the queue like we have at Lucky. As I said, we'll be announcing very soon a natural children's licensee for Lucky that will enable us to get a pretty deep wholesale penetration as well as having a cost-efficient way and profitable way of flowing goods into our own stores for kids'.

Jennifer Black

Great. Also on plus sizes at kate?

William L. McComb

What's that?

Jennifer Black

Plus sizes, is that -- anything at?

William L. McComb

No, no initiatives there yet. I told you, we're doing what they call the ginger fit at Lucky Brand. But we don't have plus sizes right now in the mix at kate. But these are all, as you can imagine, in the plan of a -- strat plan that could envision the brand and we call it $2 billion in sales. These are all areas that our brand has identified that they will get to.

Jennifer Black

Okay. I just have one follow-up for George. I was curious to know what you're the most excited about since you've joined the company.

George M. Carrara

I'm excited about a bunch of things. I see a tremendous opportunity in the area of corporate transformation. That's something that I have a good depth of experience in. Additionally, in terms of managing the growth of the company on an international basis as well as strategically in a sensible manner domestically, I think I could draw on my prior experience where, we don't have to name where that experience was, but there were successes and mistakes. So I think those learnings could be applied here on the go-forward and on prospective basis.

Operator

Next question comes from Corinna Freedman of Wedbush Securities.

Corinna L. Freedman - Wedbush Securities Inc., Research Division

I just wanted to ask a question about a comment that you made about growing the non-store comp growth -- the non-comp store growth for kate spade. If you could remind us what your growth projections are for the brand by unit, kate and Jack? And also a question on your slide where you have Juicy comps up 10% for the second half, if you could just tell us what the inventory build would be behind that and then also when could we expect a wholesale or a corresponding increase in wholesalers for Juicy?

William L. McComb

First of all, I'm glad you asked the question on kate spade because Bob just handed me, Bob Vill handed me a Post-it note and said that on my comments on kate spade, I actually, incorrectly said that we opened 8 new doors for kate spade in the first quarter. That's actually an LTM number. The kate spade 8 doors is on an LTM basis as of first quarter of 2012, so first let me correct that. In terms of store openings, what we have essentially, if I can use the word guided, what we've directionally talked about as what is assumed in our capital budget for this year, we've said kate and Jack will open just about 25 stores overall this year. We've said that, that's about 20 for kate and roughly 5 for Jack and that's stores that we own and we control on a global basis. So there's some stores in London and a Tokyo store for Jack in that. At Lucky Brand, we said it will be 10 new doors and at Juicy we said it's only 2 or 3. And that, the Lucky and the Juicy numbers are obviously very conservative, frankly so are kate's. We said that next year we would envision seeing the kate number pushed in the 35 to 40 range, and I think that would, especially with this outlet success that we're now seeing at Lucky, I think these guys have really figured out a formula that we can have a very fast-growing and very profitable business and reach an incremental consumer with Lucky. So you're going to see us ramp up the door openings on those businesses. At Juicy, we're going to sit tight and stick to our knitting and do what we did at kate and Lucky, which is wait until we get to a certain level of productivity, again in our core specialty and outlet format before we gate new doors open. And the doors that we're going to be opening are really important strategic ones like Regent Street in London, which we will open this summer, which is a flagship.

In terms of Juicy inventory for the second half, to support a 10% increase, one of the things you've heard us say is that, because I've learned this in my 5 years here, you can't just throw inventory at it and drive the comp. And while I and George together we just called out that there is no question that our buys are hurting our ability to comp right now and some of the reasons that we give you, a season code analysis in terms of comp on apparel and accessories in our specialty and outlet stores, is to be able to have a comparable base to compare the efficacy if you will, or the interest level that we're seeing from the consumer in the goods. And I think we've learned a lot on it. We know we need to increase the buy. The buy will not be increased to the full level per se, of the actual comp. But we are buying deeper. The breadth of the line wasn't a problem, it was the depth that's the problem. So as I said, the way that it works is we're size broken in days after delivering the floor sets. We've learned a lot, there are a lot of you and we had questions about how much wind will there be in the sails, so to speak, of certain product categories in fashion and I would tell you the biggest call-out I would make on the consumer acceptance at Juicy is, there a lot of naysayers out there and maybe still are around our ability to convert women out of core and into fashion, and that's the part of the business that's absolutely flying. And so we will support it with what we're calling demand appropriate inventory levels. I'm not going to put a number out there right now. We're not going to do something crazy like a 30% increase in inventory though. That is not going to happen. I want to see the kind of AUR progress that we're getting right now and that we saw in the first quarter at the brand. And I believe that if, operationally, we get behind this the right way and get out of our own way in terms of some mistakes that are holding us back, I think we can see some really great progress. I feel though like the brand has made the same progress creatively, creative vision, target audience insight, merchandising and assortment vision and clearly marketing that both kate spade and Lucky Brand have done in their earlier time. We just have to clean up the operations there. And George you want to add to that?

George M. Carrara

Yes. I just wanted to say certainly, we are not going to knee-jerk and overbuy and rather, just to add to what Bill said, we're going to look at not only prior year level, so 2011 as a guide, but we're also going to look 2 periods before that, 2010, to make sure that our buys put us in an area that is not greater than those levels but more demand appropriate.

William L. McComb

Yes, I mean well said. Well below the 2010 fourth quarter level which all of you will remember was way too high.

Operator

Your next question comes from Kate McShane of Citi Research.

Kate McShane - Citigroup Inc, Research Division

I was wondering if you could walk us through some of the drivers of improvement for kate spade profitability over the next 12 months now that you've reached your $1,000 per square foot or getting close to the $1,000 per square foot. And if you could identify some of the bigger drivers of that, of what margin expansion will be, going forward?

William L. McComb

Well, we clearly have done a good job of building the needed infrastructure at the brand corporate level. There is now tremendous leverage off of that fixed cost, the infrastructure of the design and merchandising and marketing and store ops teams, across what I'm going to call, new top line. And so, of course, the wholesale business continues to grow and that is profit margin enhancing. There is an incredible focus on the international business in increasing the footprint. But what I'm calling out is positive operating leverage due to top line growth. That's it. So I've called-out international, I've called-out wholesale, e-com continues to be a place where we're getting additional positive operating leverage. And you add those things up and that's it. But I'll tell you, it's definitely time for us to focus on revenue expansion also via new stores. And all of those add up to tremendous opportunities. The other thing is, and any time you reach that $1,000 to $1,200 a square foot as a fleet average, a light starts going off in the cockpit that says, test and learn about larger footprints. I'm not talking about 10,000 square-foot kinds of things, but going beyond the very neat and tidy store format that we've got, these guys have shown that they have categories that can really grow and they're very space bound by the very confined space that we have. And so we're not going to lose our discipline but you can argue that we've been in a test and learn mode and we've tested and learned a lot. And now we need to chase and follow those things.

Operator

Next question comes from Casey Flavin of Hedgeye Risk Management.

Casey Flavin

I had a question for you on just to get some clarity on the April comps that you provided for both kate and for Lucky. You mentioned at kate you're up double digits or strong double digits, I believe.

William L. McComb

That's right.

Casey Flavin

Can you just provide a little more clarity, Bill, as it relates to this whole Easter shift that we're seeing in retail? March obviously was a very strong number. It looks like if what you're saying is double-digit, it could imply, taking the 2 months together, that you're seeing an acceleration in the underlying 2-year trend. Can you just talk to what you're seeing based on the numbers you see in April?

William L. McComb

Well, I haven't actually done that math that you just described to give you a nod or shake on that. So I'm not sure about the acceleration, the 2 year trend. I'm sticking to my high-teens guidance for the year because as the year goes on, we're up against tougher numbers and there is still same store strong momentum in this business. But our models are -- we're continuing, let's just call it high teens as a modeled number for the year average. There absolutely March was, and a lot of the analysts reports in the last 2 days on multiple companies in the industry overall have called out, that the Easter shift, although you could confine it and say it's all confined and neat and tidy within the month of April, it really isn't, it doesn't work that way. The last week of March, there was a great acceleration and there was that big deceleration as we came up against a year ago Easter, 2 weeks ago. So I'll tell you that April comps, I mean we looked at it and we said March will be, whatever the trend is, March will be heavier and April will be lighter than whatever the baseline trend is. And that absolutely is clearly the case. And so at Juicy, as I said, you're seeing, call it a minus 10 right now, and at kate, again, a really good strong double-digit, which is great. But we're not backing off of what George laid out as our assumptions for comps.

George M. Carrara

And Casey, one thing I want to add, the month is not out yet. And what I noted, and from my past and certainly from earlier in the month, the week or 2 after Easter, different channels of distribution have different spikes and valleys so...

William L. McComb

And different traffic patterns. Exactly.

George M. Carrara

Exactly. So I really think we need to finish out this month before we could add perspective on that.

William L. McComb

Yes, I think that's why we're just not giving more detail on it. Well, let's just wait and see.

Casey Flavin

Another thing as it relates to kate here, can you just give us some color, Bill, on how you're thinking about the overall opportunity between the owned store growth and then also, it sounds like at outlet things are going very well, there's some great opportunity there to potentially accelerate. But also on the wholesale side, because that's a place where you guys are relatively under penetrated. How are you thinking about the opportunity there as well though?

William L. McComb

Carefully. I mean I'll be blunt, more carefully than Michael Kors. I say that because a lot of you ask that question. But it's in-line growth, we have great strategic partners with wholesalers. We want to keep them strategic partners. They help us position the brand. We have the right adjacencies. And there is absolutely growth to be had in wholesale. And our wholesale partners know it, and they're good partnerships and we're going to do it. We're not just going to do what, unfortunately happened to Juicy a few years ago, which is it got out of hand and got out of control. We covet the brand as primarily a direct-to-consumer brand. We want to manage it very carefully. We have not just -- I wouldn't just call out outlet. We have a big white space of opportunity in specialty stores. There are some absolutely great locations to be had in every market around the country. I mentioned on the last call that we're taking a space on the upper East side, up on Madison. That's a neighborhood that we haven't penetrated at all. I mean, yes, Bloomies is there with a great presence for the brand but we know that Upper Madison is now, I mean there's a big article last week in New York Times on, Upper Madison is now downtown. And that's true, it's true in a lot of markets. So there's a big whitespace of opportunity and internationally, obviously is huge.

Casey Flavin

Okay. And just lastly, Bill and/or George. On the whole corporate overhead side of the equation here, you guys are sort of pinning those $75 million number that's sort of more exact for the year, can you -- and it sounds like this is sort of, this is going to be a sequential reduction in those overall costs. Can you just give us, to an extent you can, of a little bit more clarity on the timing that you see some of these costs coming off as we look out over the course of the year.

William L. McComb

Well, I'll say, I would go back to the -- I won't change the overall direction that we gave about 2 years of successes stair steps down to get that number into that, I'm going to call it $45 million to $50 million cost level, as a total going into 2014. And that's really, that's the blunt answer. This is -- George has walked in and we have a really smart teamwork in our corporate transformation. We're going to -- I had said that maybe sometime in May, we would be able to come out with a more granular plan. We're not quite ready yet. We're being really careful with it. We're not going to do crazy things. We're not going to bite off some big monster that we can't swallow. We're going to be very pragmatic and George has a ton of experience in doing this. But we do have a very clear path to wind down in the, what I'll call, the inefficiency. And George, what are your thoughts on it?

George M. Carrara

Yes. I completely agree. And one of the things that I did, knowing that there was a -- we had a target of $60 million for 2013, I validated and I see a clear path to that target without getting into details.

Operator

The next question comes from Mary Gilbert of Imperial Capital.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Actually, following up on the wholesale strategy, and I'm glad that you're doing it very, very carefully, so I wondered in executing on that strategy, if you're focusing on doing exclusives. So there's that differentiation, and there's not that concern that we experienced with Juicy before with cannibalization.

William L. McComb

Well, you know, it's funny, that wasn't the problem with Juicy to be honest with you. You'd be shocked to know how many exclusives Juicy ran. And it ran up our cost structure dramatically. And I've got to say, I don't think it created the incrementality. The issue that we had at Juicy, just to be blunt, was that we built out a fleet of specialty stores. That created some cannibalization in some super high-volume markets. But the real issue was that the wholesalers had niched Juicy, for what we call its core product, its track suit, its Terry Day Dreamer handbag and the core jewelry line. And they didn't want Juicy -- not they didn't want, they just didn't buy Juicy to grow in the areas that we were seeing the best traction in our retail stores, which honestly, is the stuff that Leann walked in and said that's the future of Juicy. We're going to build off of the fun, casual styling that grows out of the track suit that L.A, Malibu influence. But Juicy is a fashion resource. And from TV stars and movie stars to high people of importance and influence, and they were buying in the glory days of our $1,000 of square foot fleet average in our retail stores. They were being outerwear and they were buying wovens and knits. We had a great sweater business, and it was not being bought that way by the department stores. And the department stores had, had such incredible success with Juicy, they had a hard time distorting and changing their buying patterns. And I think it led Juicy, we were sort of led by the nose, because of the size of the business, to stay with a look that was very 2006, 2007 for too long. So that's really the difference. I don't think that there's a big nirvana to do exclusives, per se. There've been some things that we've done, but it's not -- that's not a headline strategy for wholesale. It's just to make sure that the points of distribution are okay.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Okay. And that they're buying the brand appropriately instead of picking and choosing items and not presenting it correctly to the consumer, is that what you're saying?

William L. McComb

Say that again, Mary?

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Well they're picking and choosing the items, like you said, they were choosing the track suits, and choosing certain items and not really portraying the brand.

William L. McComb

Well, they just didn't go with -- like I said, Juicy evolved out of something very specific in the department stores because they had such amazing success. This is the tyranny of success story. They didn't take the brand where we were taking it in full price stores and online. And so we don't see that happening with kate spade and partly because kate spade was sort of reborn into department stores with a new diversity and with the same assortment package in essence that you see in our brand. One thing that Craig and his team, they are really, I'm going to say, insistent about with the department stores, is that the line have a certain critical mass and that a certain number of categories are represented. And they've even had breakthroughs even with partners like Nordstroms in getting multiple categories co-merchandised so that the whole idea of the brand not being niched into just handbags or a classification of apparel and that, that whole handwriting of the brand which you read instantly and can see telegraphically when you walk in a store, is also communicated in a wholesale setting. And that to us, is a more important part of our wholesale strategy than, say, doing exclusives.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

Got it. That's helpful. And then also in looking at Juicy, did you say that accessories, comps on accessories were up 9%? Did I hear that correctly, on inventories down 5%?

William L. McComb

Yes, you did. You heard the numbers correctly and that is on season-coded products that was spring and summer. So that's a season code. It's like the data that we gave the last time on February 29 that relates to season-coded product from spring and summer 2012 relative to season-coded product and how it performed in spring, summer 2011. And so if we saw an improvement, we saw some growth. But as I said, and I called out, I mean if Leann were sitting here next to me on the call, she would say, I want the investment community to know that I'm really happy with apparel and it's a winner and by the way, it's just going to get better throughout the year. But spring, summer accessories has been to her, design-wise and merchandising-wise, a bit of a disappointment and she's made some changes in the team there and I think that they're on their way to a great improvement for what I will call, October, November, December deliveries. We had our merchandise meeting in Los Angeles last week with domestic and international partners, not wholesalers in the U.S, but in-house, the domestic retail market and then our international partners and had a very, very good reaction to that buy. So she's getting that in order. It's a lot like when you talked to Dave DeMattei, he talked about how he staged progress there. He started with denim then he got to women's tops. The men’s business had been strong. They refined that. And they went then from specialty to outlet and to wholesale and e-com, they're on e-com right now. There's a similar staging going on here. Some real progress.

Mary Ross Gilbert - Imperial Capital, LLC, Research Division

That's great. And then finally, can you talk about where we stand with the growth strategy at kate spade? And also the growth that you're seeing in Asia, in the Middle East in Juicy up 42%. Is it the same merchandise assortment and what about the mix between apparel and accessories there?

William L. McComb

Accessories has always been a very important product category and it's been penetrated on the high-end in those markets. So accessories is important. They, no, they buy the exact same merchandise. There's some customs that we do for the Middle East, things like long dresses to the ankles that are actually market specific and very important, but they're actually inspired right out of the line. So I mean 90%, I don't know, 95% of the line is exactly what we have here and what we have there. I would say they bought it better than we did. They were courageous with it. They took some big -- they took a big dive into fashion and it has paid off tremendously for them. Those partners are very happy. But I have told you all in these calls that the brand, the health of the brand with Juicy internationally, is significantly stronger than here. It didn't have the exposure, if you will, to Juicy's, the creative stagnation that we went through in '08 and '09 and frankly, the beginning of '010. So, it's a great brand and doing really well. And we have just a very robust strat plan for the brand internationally.

Operator

Next question comes from Janet Kloppenburg of JJK Research.

Janet Kloppenburg

I just had a couple of questions. I was wondering if the goal for corporate overhead reduction to $45 million to $50 million I think by '14 is still intact? Have you had a chance to take a look at that, George?

George M. Carrara

Well, let me just point that it's day #19. But yes. I think, in terms of the path, there's a clear path, as I said earlier, to $60 million and thereafter ....

William L. McComb

In '13. $60 million and '13.

George M. Carrara

And thereafter we expect systems enhancements but a normalized level would be the $40 million to $45 million, correct.

William L. McComb

You missed it, Janet. I actually reconfirmed that in my answer to Casey's question.

Janet Kloppenburg

Okay. I apologize for that. And then on Juicy's profitability -- I'm sorry, on Juicy's comps. So if the spring season comps are up -- or spring season coded product is up, what is making the comp down? I'm confused about the delineation on the tickets.

William L. McComb

Remember a year ago coming out of 2010 and all through first quarter 2011, we had a mound of clearance at goods on fall holiday 2010 and that, at lower -- at high markdown prices, made up what I'm going to call, a disproportionate share of what is the comp base. There's also a line that we call replenishment in there, which is a really small piece of it, and we're not factoring that into the comparison.

Janet Kloppenburg

And will that be a hindrance to comps again in the second quarter, Bill?

William L. McComb

Well, we obviously, we've said that first -- that we still are sticking with, from a model perspective, first half comps to be what we're calling "flattish." April's a bit of an outlier right now, down roughly 10% month to date but the others have been down 2% and down 3% and down 4% for the quarter. And will it be a hindrance in the comp base? Less so.

Janet Kloppenburg

And otherwise, I don't know what level of clearance you had last year in the second quarter? When comparing against ...

William L. McComb

Significantly, the answer would be significantly less than what we had in the first quarter. I don't think I can give a numerical answer to that, sitting in the chair that I'm in now. I'll look at it, I know it declines a lot and the composition of inventory would've skewed more toward current and fresh inventory by second quarter. But I'd say the brand was still working through it a bit in second quarter last year not just at the higher levels.

Janet Kloppenburg

Well, it just seems to me that if inventories are going up a bit and you have less clearance comparison that you might comp better at Juicy in the second quarter ...

William L. McComb

Inventories aren't going up much in the second quarter. It's third and fourth quarter that the buys are corrected.

Janet Kloppenburg

Okay. All right. So listen, on Lucky, the introductions of the new product categories that you talked about, Big and Tall and one other one, will that be this year or is that an out-year opportunity?

William L. McComb

'13 opportunity. Actually holiday, large size, plus size women's and Big and Tall for wholesale will be for fourth quarter of this year. Children's will be for spring of 2013 and then rolling that through as an impact into our retail stores will be, just call it, early next year.

Janet Kloppenburg

And will all the cleanup at Adelington, is that all behind you now or is it more residual coming into the second quarter?

William L. McComb

No, it's done now. It's done. It really was a January effect.

Janet Kloppenburg

Okay. So we should expect to sharply improve the profitability there in the second quarter, Bill?

William L. McComb

Yes, improved.

Janet Kloppenburg

Improved? Because I thought there was a like a high-teen operating margin business?

William L. McComb

It is. But again, even in that segment, I would tell you that the flows -- don't assume that the profitability is straight line quarter-to-quarter-to-quarter. Especially our first quarter, don't forget, we had this screwy thing where our first quarter is Jan, Feb, March, not a retail calendar. So you've got, January is off a bit. First quarter is depressed.

Operator

Next question comes from Bob Drbul of Barclays.

Robert S. Drbul - Barclays Capital, Research Division

Just a couple of questions. On kate, you talked about the watch introductions, successfully launched watches in Q1. Who's your partner on the watches and was it in wholesale and retail and are there any differentiations around it? And is that a big comp driver? How are you reporting that, including those sales, in the result?

William L. McComb

Well, we just got it done. It happened at the end of the quarter, they came in mid March. And I said during my comments, I'll say loudly again, we have no partner. We do these internally ourselves and our team is really good at it. They've built a great supply chain. It -- we actually introduced some styles first in wholesale, they all flowed to our stores. They immediately hit the radar of top sellers -- top store-wide sellers. We ran out of stocks in department stores almost immediately on the bangle watch. We're really excited about it. Did it help drive comp? Yes, but not a lot because it was this last 2 weeks of March and there were a lot of other things working well. It's a big area for upside. And I know all of you are all tuned into watches because of the big success that both Michael Kors and Marc Jacobs have seen with the watch business especially on a global basis. And by the way, it is a huge opportunity throughout Asia, absolutely huge. And we have a partner there that can in effect, broker it in Asia to sell to different nontraditional wholesale partners. So new call-out, you'll hear more about it undoubtedly as it goes, this is a first-quarter report and that was 2 weeks in it but it was a big enough call-out for me to name it.

Robert S. Drbul - Barclays Capital, Research Division

Great. And then just a little bit of clarity. So on the Juicy side of it, the questions previously, from Janet I think, when you look at the guidance that you've given on the first half of Juicy and you look at the minus 10 for April, get back to flat, that's a pretty big acceleration sort of in May and June for the first half. How will that play out or how should that play out? I'm a little confused on how we can get there?

William L. McComb

Well, I'm not surprised you're confused, it's a little confusing. I mean, numerically we look at it, we had said before, I think an important answer to a call out from Janet's question was that the actual in -- merchandise planning and allocation in the inventory depth fix doesn't come until third quarter. And it does come in third quarter and it's meaningful and sizable. However, the May delivery is deeper and that should be better. And there definitely are April traffic patterns that are different than what we saw in March or even February. And so do we have a little bit of exposure there? Maybe, but I think we're well hedged in terms of the overall range, okay. And the bigger call-out is like I said, the inflection point for third quarter. And I guess the thing that you hear us saying is, look, I don't want to get out of the tips of my skis on Juicy, but these are thought-out comments. There really are some great things happening with demand and sell-through rate. And if the business were supported better, there's no question we would be having a good comp. And whether that's a plus 20 or a plus 8, I don't know. I don't know. So generally speaking in terms of managing our guidance, I don't think we're widely off by staying flattish for the first half. A couple points of exposure, maybe, but we'll contain it. George?

George M. Carrara

Yes. Bob, just to clarify, our inventory position on Juicy will be at a more appropriate level during the second half. We'll begin to make a transition between now and June so it's not just going to be day 1, July 1. We'll be building it up between now and June 30.

Robert S. Drbul - Barclays Capital, Research Division

Okay. Great. And the other question that I have is on the marketing levels and the marketing spending and the increases that you're talking about, can you provide any color on the distribution between brand increases or the cadence throughout year in terms of will they impact significant year-over-year increase in the second quarter, third quarter? How should we think about it from an SG&A perspective?

William L. McComb

Well, we definitely invested in marketing in all 3 of the brands. I think on the last call that was a big call-out that Andy made that we were taking marketing spend up across all 3, and across all 4 quarters, to be honest with you. So I think what you saw on first quarter's going to be pretty representative across each of the other quarters. George, do you have any clarity on that?

George M. Carrara

Yes. For the first quarter, where we really accelerated was with Juicy and kate versus the LY, to a certain extent, Lucky but not too very material extent.

Operator

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

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

First question, George, can you quantify what the shift in marketing expense was into first quarter and then give some little more color on how the onetime-ish items in the design group impacted sales marches there?

George M. Carrara

Let me hear your second question again please?

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

You mentioned some onetime items negatively impacting margins in the Adelington Design Group. So could you just give us a little -- maybe quantify how much those items impacted the margins?

George M. Carrara

Sure. Well, to respond to the first question, in terms of marketing expense for the first quarter, the acceleration as compared to the prior year in the aggregate, is a high single-digit number, okay? And then in terms of the second part of your question, Adelington, we had a selloff of a few million dollars of DKNY inventory during the quarter. And on that, our gross profit was about a negative $1 million or so.

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

The negative $1 million, I think $4 million of sales?

George M. Carrara

That's about right.

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

Okay. And on Lucky, is the comp being driven by transactions, pricing or units per transaction or a combination of all 3?

William L. McComb

It's a combination. Traffic is up, conversion is up, AUR is up, UPT is up. It's little like our kate spade phenomenon. Every one of those is up.

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

And then on the e-mails and the mailers, can you talk about what the circulation increases have been year-over-year and is there room to grow that further?

William L. McComb

No, I'll wait and let Dave -- sometime this year we're going to get you all back in front of the brand leaders like we did April 28 last year. I can't commit whether that's July or August or September, it's in that time frame, third quarter, I'll get you in front. And they can talk to you about what they've done. I will say, remember, they're direct marketers. It's a brilliant team. Their use and refinement of the database and segmentation is absolutely incredible. Their online, offline marketing is, it's really smart and it's made a material difference in this business. And so they've made their spend offline more efficient, but everything they do has an off and online component to it.

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

Great. And then finally, is there meaningful difference in the Juicy comp between the specialty store, the full price and the outlets?

William L. McComb

I don't think -- we are not accustomed to splitting out differences right now on that. So I'd rather not make comments. I also don't have the numbers right in front of me.

One other comment I want to make, I think that'll be our last question. I understand that the webcast went down for about 40 seconds while George was talking, I want to make sure everyone that's listening via webcast knows that the full audio will be available on the website. Those that had -- were on the call via dial-in, I don't think had any interruption in broadcast but those that were on the website did. So back in the Investor Relations section you'll be able to capture all of those missing 40 seconds of George's words. So that's it. I want to thank you all for dialing in. Thanks for your questions and look forward to seeing you back out in the market soon. Thanks, Paula.

Operator

Thank you. This concludes today's conference. You may now disconnect.

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Source: Liz Claiborne's CEO Discusses Q1 2012 Results - Earnings Call Transcript
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