I'm going to confess right up front to a fair degree of ignorance about Liz Claiborne (NYSE:LIZ). I don't follow every retail stock out there, and I don't know this one well. But when I see it get hammered by more than 20% over a couple of days, all for a crummy earnings report and a subsequent credit downgrade, my inner greed tells me to take a look.

There's a lot not to like at Liz, starting with its $0.16 per share in Q1 2007 earnings, compared to $0.45 a share for the prior year. (Pardon me -- $0.22 in "adjusted" EPS for the current-year quarter, versus $0.60 in 2006.)

Analysts were amazed that Liz had whiffed like this, since they'd hoped to see another $0.60-a-share showing. UBS downgraded the stock in a pretty humorous, humorously late, and possibly 180-degree wrong decision, further described by our friends at Marketwatch.

UBS points out that while Liz's products are selling, discounting is rampant. (Coincidentally, my wife came home with a very nice Claiborne purse last night, which she got for next to nothing at a discounter. Good for us. Bad for shareholders.) UBS points out that management will have to cut the fat and shake things up.

Well, duh!

From where I sit, those are reasons to consider buying a stock, not selling -- at least, now that a lot of the damage to the share price is already done.

Liz has a lot of work to do. Free cash flow has dwindled, even as the top line has grown, much of it because of a fattening SG&A line. Moreover, this space is full of tough competition, from Ann Taylor (NYSE:ANN) to Jones Apparel Group (NYSE:JNY), Coldwater Creek (NASDAQ:CWTR), and Hidden Gems laggard New York & Co. (NYSE:NWY).

However, as bad as things look, retail isn't rocket science. Nor is it pharmaceuticals, which makes me wonder whether an ex drug-industry dude, CEO William McComb, is the right man for the top job at Liz. Did people learn nothing from Paul Pressler's terrible tenure at Gap (NYSE:GPS)?

With the right management decisions -- or maybe some kind of action that throws the bums out and replaces the organization with a new, focused slate of retail veterans -- I think Liz Claiborne could pay off very well for investors. Whether or not it happens, well, that's the million-dollar question. Only those with the guts to take the risk on the buy side will be able to celebrate if things to turn for the better.

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At the time of publication, Seth Jayson had no positions in any company mentioned here. See his latest blog commentary here. View his stock holdings and Fool profile here. Fool rules are here.