Bank of America & Merrill Lynch Consumer Conference

Transcription

1 1 Bank of America & Merrill Lynch Consumer Conference March 11, 2009

2 2 Safe Harbor Statement Statements contained in this presentation that relate to future events or the Company's future performance, including, without limitation, statements with respect to the Company's anticipated results of operations or level of business for 2008 or any other future period, are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of Such statements are based on current expectations only and are not guarantees of future performance, and are subject to certain risks, uncertainties and assumptions. These forward looking statements are based on current expectations and are subject to the qualifications set out in the Company s 2008 Annual Report on Form 10-K for the period ended January , including, without limitation, those set forth under the headings "Risk Factors" and "Statement Regarding Forward-Looking Disclosure." Please note that in this presentation, projected SG&A for 2009 is presented on an adjusted basis. The Company believes that the adjusted guidance provided in this presentation provides a more meaningful representation of its projected operations and financial performance and will allow for a more meaningful comparison with historical results. Adjusted guidance excludes the impact of expenses incurred in connection with the Company s streamlining activities, the loss on disposal of discontinued operations and the results of discontinued operations as well as the impact of any acquisitions, divestitures or share repurchases.

3 From a Channel-Focused Structure to a Other Other Brands Brands Dana Dana Buchman Buchman Emma James Emma James Prana Enyce Laundry C&C Ellen Tracy Kensie Sigrid Monet DKNY Jeans Liz Brand Lucky Enyce Laundry C&C Ellen Tracy Kensie Sigrid Monet DKNY Jeans Liz Brand Other Brands Dana Buchman Enyce Laundry C&C Ellen Tracy Kensie Sigrid Monet DKNY Jeans Liz Brand Kate Kate Kate Juicy Juicy Juicy Other Brands Dana Buchman Prana Laundry Sigrid Ellen Tracy QuickTime and Monet a TIFF (Uncompressed) Sigrid decompressor Monet DKNY Jeans Liz Brand Kate Juicy Lucky Lucky Lucky Other Brands Dana Buchman Ellen Tracy DKNY Jeans Liz Brand Kate Juicy Lucky Other Brands Emma James Sigrid Sigrid Sigrid Prana Enyce Monet Monet Monet Laundry C&C DKNY Jeans DKNY Jeans Ellen Tracy DKNY Jeans Kensie Liz Brand Liz Brand Sigrid Liz Brand Kate Juicy Lucky Other Brands Kate Juicy Lucky Other Brands Dana Buchman Monet DKNY Jeans Liz Brand Kate Juicy Lucky Other Brands Kate Juicy Lucky Mexx Wholesale Jewelry Handbags Retail Outlet Licensing Int'l Sourcing Cosmetics * For illustrative purposes only. Not drawn to scale. 3

4 Brand-Centric, Monobrand Organization Domestic-Based Direct Brands Int l-based Direct Brands Partnered Brands Wholesale Non- Wholesale Non- Wholesale Non- Wholesale Non- Wholesale Non- Wholesale Non- Wholesale Non- Wholesale Wholesale Retail Retail Retail Retail Retail Retail Retail Outlet Outlet Outlet Outlet Outlet Outlet Outlet Non- Non- Licensing Licensing Licensing Licensing Licensing Licensing Licensing Int l Int l Int l Int l Int l Int l Int l Sourcing Sourcing Sourcing Sourcing Sourcing Sourcing Sourcing Sourcing Sourcing Lucky Brand Juicy Couture Kate Spade Mexx Liz Claiborne DKNY Jeans Monet Kensie Mid-Tier * For illustrative purposes only. Not drawn to scale. 4

5 2009 Operating Priorities Cash Flow and Liquidity Brand Execution Cost Management Mexx Turnaround Liz Claiborne New York 55

6 Cash Flow and Liquidity Extended bank facility through May 2011 Reduced FY09 capex to $60 - $70M Suspended $21M annual dividend Received $90M tax refund Completed Completed Completed Completed Signed $75M Li & Fung sourcing deal Converted $40M of trade LCs to open account to expand revolver availability Completed Completed Exceeded $265M committed cost reduction plan Pursue additional cost reduction initiatives Improve inventory/working capital turns Monetize owned real estate portfolio Completed Ongoing Ongoing In-process Synchronize payment terms with manufacturing vendors from 15 to 30 days In-process 66

7 Brand Execution Assortment and Mix Shifts Juicy: Expand role of intimates and loungewear; discontinue men s Lucky: Nearly double tops assortment; new entry price T-shirt programs Kate: Launch apparel in Fall and further expand jewelry Price Point Recalibration Inventory Management Juicy: Increase opening price fashion items by 40% this Fall Lucky: Increase $99 opening price point denim offering to 25% of denim inventory Kate: Grow concentration of key price point items between $195 and $395 Conservative planning for Summer and Fall Teams incentivized to manage inventory turns Traffic-Driving Promotions Juicy: Tracksuit promotions to drive traffic Lucky: Cross-ruff product categories for added value Capital Light Growth Juicy: Greece, Mexico, and travel retail Lucky: Launch footwear at wholesale via license Kate: Expansion in Japan and travel retail 7

8 8 Li & Fung Partnership Overview Entered into a long-term, exclusive Buying Agency Agreement Strategic Rationale Best-in-class systems, management and talent Li & Fung will act as the primary global sourcing agent for all brands in the LCI portfolio with the exception of jewelry Access to a broader network of more global manufacturing partners Liz Far East will close 5 offices Improved speed-to-market models Approximately 250 positions will transfer to Li & Fung and 225 will be eliminated Li & Fung pays to LCI at closing $75 million in cash and an additional payment of $8 million to offset the restructuring expenses associated with the transaction Going forward, LCI will pay a buying agency commission based on the cost of its product purchases through Li & Fung Enhanced going-in gross margins beginning Holiday 2009 and beyond G&A cost neutral ex restructuring costs Cash positive

9 Two-Year Cost Management Trend $1,886M ($342M) Corporate and Partnered Brands SG&A Actions ($95M) International- Based Direct Brands ($19M) Eliminated 2,675 global positions Delayered management Closed 6 DCs Fragrance licensing deal FX Effect $200M Domestic-Based Direct Brands Retail Expansion & Investment 140+ new stores Retail infrastructure Marketing $1,630M Exceeding Expectation of $265M

10 10 Mexx historically operated at mid-single digit operating margin Cost structure out of line Product value declined Quest for higher margins to offset volume declines Styling shifted from twisted to minimalist Undisciplined distribution growth Outdated sourcing capabilities

11 Update on Turnaround Update on Turnaround 2009 Outlook Building talent Key hires include Chief Merchandise Officer, Chief Financial Officer, VP Sourcing, VP Eastern Europe and VP Retail Operations Search underway for CEO and Chief Marketing Officer Building capabilities Improved costing, speed to market and calendar adherence with Li & Fung Reduced approximately 250 positions in the past two years Another year of transition Operating profit at breakeven Rationalization of distribution Extensive inventory clearance in 1H09 Additional cost reductions Clarify and elevate brand position by 2H09 New product to hit in Fall 2009 European, contemporary Twisted More emotional forever young and sexy Eliminated sub-scale businesses Closed UK retail stores Shut down Wellbeing (sports/yoga category) Rationalized retail partner store formats 11

12 12

13 13

14 14

15 15

16 16

17 17

18 18

19 19 Shops

20 20 Shops

21 Operating Assumptions Challenging 4Q08 conditions continue through FY09 Comp Store Sales 1Q 3Q: Down 15 25% for all brands 4Q: Comps flatten as we anniversary the sharp downturn that began in September 2008 Operating Margin 1Q: Extremely difficult operating loss 2Q 4Q: Improvement in each successive quarter as cost reductions flow through 2H09: Modest margin expansion from improving sell-through rates on Liz Claiborne New York and adapted assortments, pricing and promotional strategies in all brands Gross margin accretion from Li & Fung deal beginning Holiday 2009 Carefully manage our liquidity position and focus on maximizing our availability under our bank credit facility

22 22 Q&A

23 23 Appendix

24 2008 Sales Breakdown Sales by Brand Sales by Channel Sold/Exited Brands 4 4% Other Partnered Brands 3 Other Liz 10% Family Brands 2 9% Liz Claiborne Brand 1 17% Lucky 12% Mexx 30% Juicy 15% Kate 3% Partnered Brands Domestic Wholesale 29% Domestic- Based Direct Brands Domestic Wholesale 15% Domestic Retail 19% International Wholesale 17% International Retail 18% Licensing 2% $4.0B $4.0B 1 Liz Claiborne Brand includes: wholesale apparel, accessories, jewelry, outlet, international and e-commerce 2 Other Liz Family Brands include: Liz&Co., Concepts, Claiborne, Axcess, Tint (incorporated into Liz&Co.) and Stamp 10 (incorporated into Axcess) 3 Other Partnered Brands include: DKNY Jeans Group, Monet Family, mac & jac, and kensie 4 Sold/exited brands not included in discontinued operations 24

25 4Q08 Retail Key Performance Indicators Traffic (4%) (10%) (10%) Conversion 7% 22% 7% UPT 11% 6% 7% AUR (27%) (26%) (18%) ADT (19%) (21%) (12%) 25

26 26 Bank of America & Merrill Lynch Consumer Conference March 11, 2009