- Reports Q2 Fiscal 2008 GAAP Loss per Share from Continuing Operations of ($0.17) and Adjusted EPS from Continuing Operations of $0.09

- Completes Bank Credit Facility Amendment

- Drives Inventory Decrease of 26% Compared to Q2 2007

- Narrows Full Year 2008 Adjusted EPS Guidance to a Range of $1.40 to $1.50 from a Range of $1.40 to $1.60

NEW YORK, Aug. 13 /PRNewswire-FirstCall/ -- Liz Claiborne Inc. (NYSE: LIZ) today announced earnings for the second quarter and first six months of 2008. For the first six months of 2008 and on a GAAP basis, the loss per share from continuing operations was ($0.32) compared to diluted earnings per share ('EPS') from continuing operations of $0.20 for the first six months of 2007. Adjusted diluted EPS from continuing operations for the first six months of 2008 were $0.37 compared to adjusted diluted EPS from continuing operations of $0.40 for the first six months of 2007. Net sales from continuing operations for the first six months of 2008 were $2.088 billion, a decrease of $24 million, or 1.2% from 2007, inclusive of an $81 million decrease associated with brands or certain brand activities that have been closed / exited and have not been presented as part of discontinued operations.

For the second quarter of 2008 and on a GAAP basis, the loss per share from continuing operations was ($0.17) compared to diluted earnings per share from continuing operations of $0.10 for the second quarter of 2007. Adjusted diluted EPS from continuing operations for the second quarter of 2008 were $0.09 compared to adjusted diluted EPS from continuing operations of $0.23 for the second quarter of 2007. Net sales from continuing operations for the second quarter of 2008 were $974 million, a decrease of $75 million, or 7.1% from 2007, inclusive of a $47 million decrease associated with brands or certain brand activities that have been closed / exited and have not been presented as part of discontinued operations.

The adjusted results for the second quarter and first six months of 2008 and 2007 on a continuing operations basis exclude the impact of expenses incurred in connection with the Company's streamlining and brand-exiting activities.

The Company believes that the adjusted results for the second quarter and first six months of 2008 and 2007 and the adjusted projected results for fiscal 2008 represent a more meaningful presentation of its historical and estimated operations and financial performance since these results provide period to period comparisons that are consistent and more easily understood. The attached tables, captioned 'Reconciliation of Non-GAAP Financial Information', provide a full reconciliation of actual results to the adjusted results.

William L. McComb, Chief Executive Officer of Liz Claiborne Inc., said: 'Second quarter adjusted EPS from continuing operations were $0.09 in what remains a very challenging macroeconomic environment. Although expected, our Partnered Brands net sales and total company operating margin results were disappointing. This was offset by demonstrated progress on a number of fronts. In particular, we generated an 18% net sales increase in our retail-based Direct Brands segment, driven by a 13% comp store sales increase in Juicy Couture and a 5% comp store sales increase in Lucky Brand. We realized tangible benefits from our streamlining activities in the second quarter, as evidenced by the $22 million year over year reduction in adjusted SG&A. We also reaped the benefits of our focus on working capital, as evidenced by the 26% reduction in inventory compared to last year. This enables a clean transition into the second half and begins to position us well for the 2009 re-launch of our flagship Liz Claiborne brand under the design direction of Isaac Mizrahi and the re-launch of our Claiborne men's business with John Bartlett as well.'

Mr. McComb added, 'While our second quarter results exceeded our conservative expectations, the difficult macroeconomic environment causes us to be cautious in our outlook as we proceed through the second half of the year. Accordingly, we are narrowing our fiscal 2008 adjusted EPS guidance range, resulting in a new range of $1.40 to $1.50, compared to the previous range of $1.40 to $1.60. For the third quarter of 2008, we expect adjusted EPS to be in the range of $0.37 to $0.42.'

Mr. McComb concluded, 'We are currently in the execution phase of our turnaround. We have built strong brand teams and are accelerating initiatives that we believe will result in a solid and consistently profitable company. Our focus on improving cash management, productivity and operating margin represent big opportunities for us as we move forward. We are not expecting a significant macroeconomic recovery in the near future, but will continue to prudently execute our plans, implementing very meaningful product initiatives and driving operating margin expansion.'

The Company will sponsor a conference call today at 10:00 am EDT to discuss its results for the second quarter and first six months of 2008. The dial-in number is 1-888-694-4676 with pass code 58108610. The webcast and slides accompanying the prepared remarks can be accessed via the Investor Relations section of the Liz Claiborne website at www.lizclaiborneinc.com . An archive of the webcast will be available through September 3, 2008. Additional information on the results of the Company's operations is available in the Company's Form 10-Q for the second quarter of 2008, which is being filed today with the Securities and Exchange Commission.

OPERATING SUMMARY

* The Company aggregates its brand-based activities into two reporting segments as follows:

-- The Direct Brands segment - consists of the specialty retail, outlet, wholesale apparel, wholesale non-apparel (including accessories, jewelry and handbags), e-commerce and licensing operations of the Company's four retail-based brands: Mexx, Juicy Couture, Lucky Brand and Kate Spade.

-- The Partnered Brands segment - consists of the wholesale apparel, wholesale non-apparel, outlet, specialty retail, e-commerce and licensing operations for the Company's owned and licensed wholesale-based brands.

* The results of the Company's former Emma James, Intuitions, J.H. Collectibles, Tapemeasure, C&C California, Laundry by Design and Prana brands in addition to the retail operations of the Company's former Ellen Tracy brand and certain of the retail operations of the Sigrid Olsen brands are shown as discontinued operations. In the second quarter of 2008, the Company entered into an exclusive long-term global licensing agreement for the manufacture, distribution and marketing of its fragrance brands.

* Net sales from continuing operations for the second quarter of 2008 were $974 million, a decrease of $75 million, or 7.1% from 2007, inclusive of a $47 million decrease associated with brands or certain brand activities that have been closed / exited and have not been presented as part of discontinued operations. The impact of changes in foreign currency exchange rates in our international businesses increased net sales by approximately $43 million, or 4.1%, during the quarter. Net sales for our segments are provided below:

-- Direct Brands segment net sales increased 18.2% in the second quarter to $584 million.

-- Partnered Brands segment net sales decreased $165 million, or 29.7%, in the second quarter to $390 million, inclusive of a $47 million decrease associated with brands or certain brand activities that have been closed / exited and have not been presented as part of discontinued operations.

* Net sales for our Direct Brands segment in the second quarter were as follows:

-- Mexx - $289 million, an 8.8% increase compared to last year. Excluding the impact of changes in foreign currency exchange rates, net sales for Mexx were $253 million, a 4.9% decrease compared to last year.

-- Juicy Couture - $148 million, a 47.4% increase compared to last year.

-- Lucky Brand - $118 million, a 9.3% increase compared to last year.

-- Kate Spade - $30 million, a 44.5% increase compared to last year.

* Operating loss in the second quarter was ($26) million ((2.6)% of net sales) compared to an operating profit of $25 million (2.4% of net sales) in 2007. Adjusted operating income in the second quarter was $21 million (2.2% of adjusted net sales) compared to $45 million (4.4% of adjusted net sales) in 2007. Operating income for our business segments are provided below:

-- Direct Brands segment operating income in the second quarter was $13 million (2.2% of net sales), compared to $30 million (6.1% of net sales) in 2007. Direct Brands segment adjusted operating income in the second quarter was $27 million (4.7% of adjusted net sales) compared to $36 million (7.3% of adjusted net sales) in 2007.

-- Partnered Brands segment operating loss in the second quarter was ($38) million ((9.9)% of net sales), compared to an operating loss of ($5) million ((0.9)% of net sales) in 2007. Partnered Brands segment adjusted operating loss in the second quarter was ($6) million ((1.6)% of adjusted net sales) compared to an adjusted operating profit of $10 million (1.7% of adjusted net sales) in 2007.

* Expenses associated with our streamlining and brand-exiting activities were $47 million in the second quarter of 2008 compared to $21 million in the second quarter of 2007. For the first six months of 2008, expenses associated with our streamlining and brand-exiting activities were $110 million compared to $31 million in the first six months of 2007.

* Inventories decreased 26.0% to $497 million compared to the second quarter of 2007, primarily reflecting decreases in our Partnered Brands segment, including the impact of brands sold, discontinued, or licensed, partially offset by increases in our Direct Brands segment. Inventories of ongoing Partnered Brands decreased 41.4% compared to the second quarter of 2007. The impact of changes in foreign currency exchange rates increased inventories by $22 million, or 3.2%, in the second quarter of 2008 compared to the second quarter of 2007.

* Cash flow from continuing operating activities for the last twelve months was $254 million.

* We ended the quarter with $100 million in cash and with $898 million of debt outstanding. Our total debt to total capital ratio was 38.6% in the second quarter compared to 25.4% in 2007, primarily reflecting the impact of the 2007 goodwill impairment in addition to share repurchases, capital expenditures and acquisition-related payments over the last 12 months.

    SECOND QUARTER RESULTS

Overall Results

Net sales from continuing operations for the second quarter of 2008 were $974 million, a decrease of $75 million, or 7.1% from the second quarter of 2007, due to decreases in our Partnered Brands segment, offset by increases in our Direct Brands segment. Net sales were inclusive of a $47 million decrease associated with brands or certain brand activities that have been closed / exited and have not been presented as part of discontinued operations. The impact of changes in foreign currency exchange rates in our international businesses increased net sales by approximately $43 million, or 4.1%, during the quarter.

Gross profit as a percent of net sales was 47.4% in 2008 compared to 49.3% in the second quarter of 2007, principally reflecting decreased gross profit rates in our Direct and Partnered Brands segments, partially offset by an increased proportion of sales from our Direct Brands segment, which runs at a higher gross profit rate than the company average.

Selling, General & Administrative expenses ('SG&A') were $487 million, or 50.1% of net sales in 2008, compared to $492 million, or 46.9% of net sales in the second quarter of 2007, primarily reflecting the following:

* a $26 million increase due to the impact of changes in foreign currency exchange rates in our international operations;

* a $17 million increase associated with retail expansion in our Direct Brands segment;

* a $16 million increase in Direct Brands SG&A;

* a $13 million year over year increase in expenses associated with our streamlining and brand-exiting activities; and

* a ($78) million decrease in Partnered Brands and corporate SG&A.

Operating loss was ($26) million ((2.6)% of net sales) in the second quarter of 2008 compared to operating income of $25 million (2.4% of net sales) in the second quarter of 2007. Adjusted operating income in the second quarter was $21 million (2.2% of adjusted net sales) compared to $45 million (4.4% of adjusted net sales) in 2007. The impact of changes in foreign currency exchange rates in our international businesses was immaterial during the quarter.

Income taxes in the second quarter of 2008 decreased by $25 million to a tax benefit of $20 million compared to a tax expense of $5 million in the second quarter of 2007. The tax benefit increased by $2 million as a result of discrete items which along with changes to the mix and amounts of pre-tax earnings increased our tax rate in the second quarter of 2008 to a benefit of 55.2% from a tax rate of 35.2% in the second quarter of 2007.

Loss from Continuing Operations in the second quarter of 2008 was ($16) million, or ($0.17) per share, compared to income from continuing operations in the second quarter of 2007 of $10 million, or $0.10 per share. Adjusted diluted EPS from continuing operations in the second quarter of 2008 were $0.09 compared to adjusted diluted EPS from continuing operations of $0.23 in the second quarter of 2007.

Net loss in the second quarter of 2008 was ($23) million, inclusive of losses related to discontinued operations of ($7) million, compared to net income of $14 million in the second quarter of 2007, inclusive of income from discontinued operations of $4 million. Loss per share was ($0.25) in the second quarter of 2008 compared to diluted EPS of $0.13 in the second quarter of 2007.

    Segment Highlights

Direct Brands

Net sales in our Direct Brands segment in the second quarter were $584 million, increasing $90 million, or 18.2%.

Net sales for Mexx were $289 million, an 8.8% increase compared to 2007. Excluding the impact of changes in foreign currency exchange rates, net sales for Mexx were $253 million, a 4.9% decrease compared to last year.

-- We ended the quarter with 133 specialty stores, 95 outlets and 284 concessions, reflecting the net addition over the last 12 months of 10 outlet stores and the net closure of 22 concessions;

-- Average retail square footage in the second quarter was approximately 1.446 million square feet, a 9% increase compared to 2007;

-- Sales per square foot for comparable stores over the latest twelve months was $467; and

-- Comparable store sales decreased 2% in the second quarter, reflecting comparable store sales decreases in our Mexx Europe business, partially offset by increases in our Mexx Canada business.

Net sales for Juicy Couture were $148 million, a 47.4% increase compared to 2007, primarily driven by increases in retail, outlet, wholesale apparel and non-apparel.

-- We ended the quarter with 48 specialty stores and 25 outlet stores, reflecting the net addition over the last 12 months of 22 specialty stores and 12 outlet stores;

-- Average retail square footage in the second quarter was approximately 235 thousand square feet, a 126% increase compared to 2007;

-- Sales per square foot for comparable stores over the latest twelve months was $1,278; and

-- Comparable store sales increased 13% in the second quarter.

Net sales for Lucky Brand were $118 million, a 9.3% increase compared to 2007, primarily driven by increases in retail and outlet, partially offset by decreases in wholesale apparel and wholesale non-apparel.

-- We ended the quarter with 179 specialty stores and 29 outlet stores, reflecting the net addition over the last 12 months of 32 specialty stores and 22 outlet stores;

-- Average retail square footage in the second quarter was approximately 457 thousand square feet, a 29% increase compared to 2007;

-- Sales per square foot for comparable stores over the latest twelve months was $620; and

-- Comparable store sales increased 5% in the second quarter.

Net sales for Kate Spade were $30 million, a 44.5% increase compared to 2007, primarily driven by increases in retail and outlet.

-- We ended the quarter with 33 specialty stores and 23 outlet stores, reflecting the net addition over the last 12 months of 13 specialty stores and 19 outlet stores;

-- Average retail square footage in the second quarter was approximately 102 thousand square feet, a 97% increase compared to 2007;

-- Sales per square foot for comparable stores over the latest twelve months was $752; and

-- Comparable store sales decreased 7% in the second quarter.

Direct Brands segment operating income in the second quarter was $13 million (2.2% of net sales), compared to $30 million (6.1% of net sales) in 2007.