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By
Reuters
Published
Oct 2, 2012
Reading time
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Fifth & Pacific slashes profit view on Juicy Couture

By
Reuters
Published
Oct 2, 2012

NEW YORK - Fashion company Fifth & Pacific Cos Inc (FNP.N) on Monday slashed its profit outlook for the year, citing difficulties at its struggling Juicy Couture brand in selling apparel at full price.



Image: Juicy Couture


Fifth & Pacific, known as Liz Claiborne Inc until May, lowered its forecast for 2012 earnings excluding items like interest, tax, depreciation and amortization (adjusted EBITDA) to a range of $100 million to $115 million, down from its prior range of $125 million to $140 million.

Juicy Court is Fifth & Pacific's fifth largest brand by revenue and store count, and the news prompted a sell-off that sent shares down 15.4 percent to $10.80 in after-hours trading.

Earlier this year, Chief Executive William McComb said Juicy Couture's business would start improving in the second half of 2012. The once-hot brand beloved for its velour track suits with an urban look has fallen out of favor with many shoppers.

In February, Fifth & Pacific said Juicy Couture's comparable sales would rise 10 percent in the second half of the year after declining last year. Instead, they fell 1 percent during the third quarter.

"Juicy is taking a step backwards," McComb said on a conference call on Monday afternoon.

McComb said there were "significant shortfalls in full-price" selling at Juicy Couture, a trend he expects will continue in the fourth quarter, which includes the holiday season.

"Clearly we've hit price resistance," he said.

Sales at the company's kate spade luxury shoe and accessories brand have been torrid, and sales have also continued to rise at Lucky Brand, but not enough to make up for the shortfall at Juicy. Comparable sales at kate spade rose 21 percent in the third quarter and were up 4 percent for Lucky Brand.

Fifth & Pacific raised its profit estimates for kate spade and Lucky Brand. But for Juicy Couture, the company now expects to earn $28 million to $38 million this year, compared with its previous range of $70 million to $73 million.

To address Juicy's problems, McComb said Fifth & Pacific would ship more merchandise to higher grossing stores, be quicker about getting unsold merchandise into outlets and out of its regular stores, and cut costs.

In the past several years, the company has sold off many of its brands, including Liz Claiborne, to lessen its debt load and focus on the brands where it sees the most potential.

(Editing by Leslie Adler)

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