Consumer brands company Liz Claiborne
Liz Claiborne shares plunged yesterday when the company cut its 2012 profit outlook and announced that its chief financial officer, Andrew Warren, will depart in March. Liz Claiborne (soon to be known as Fifth & Pacific) recently made a gamble, selling off brands like Liz Claiborne and Monet to J.C. Penney to focus on its higher-end, more youthful brands Lucky, Juicy Couture, and Kate Spade.
Investors applauded Liz Claiborne's decision to sell off the namesake and other underperforming brands, and in many cases, sharpening focus on stronger brands can be a logical move. However, Liz Claiborne's been a wreck for a while now, and just because it's devised a logical strategy doesn't mean it will be able to execute.
This company's suffered an identity crisis for years. In 2006, William McComb took over as chief executive officer; there was good reason for skepticism, since he wasn't an apparel merchant and came on board from Johnson & Johnson. A glance at Liz Claiborne's long-term chart doesn't give an impression of exemplary performance since he took the reins. In fact, Liz Claiborne hasn't reported an annual increase in sales since the year ended January 2005.
This reminds me a bit of Talbots
Before its decision to shed the namesake brand, Liz Claiborne had another thing in common with Talbots: aiming for the female baby boomer demographic. That demographic group has been notoriously ill-served by retailers and has been financially strapped in the aftermath of the financial crisis to boot; Coldwater Creek
Liz Claiborne's looking for a rebirth with a new name in 2012, so shedding the boomer-oriented brands is a logical move. However, whether this company's named Liz Claiborne or Fifth & Pacific, it still faces the same brutal competitive landscape that's making life hard for many retailers and consumer goods companies. Investors should avoid this dicey bet. I'm making a CAPScall as soon as this article publishes, and you'll be able to track my progress here.
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Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of Johnson & Johnson. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.