Hi Liz. Both LIZ and TOM (as well as Ralph Lauren)have broken below both their 50 day and 200 day moving averages. Liz Claiborne in particular looks bad to me regarding downtrending OBV and negative money flow so I would not chase the stock (but then that's me). With LIZ's announced intentions to acquire another company, the acquisiton would probably end up being dilutive to the stock and produce further weakness. Also with analysts lowering their ratings from buys to holds, they've signalled their abandonment of companies in this sector. So many of the retail stocks look like short-sale candidates to me. Any you think might be worthwhile plays? Both RL & LIZ look likely to fall further from here.
....What follows are a few articles. One in particular is fairly negative and looks like it helped trigger a retreat in the stocks in the retail sector.
Dow Jones Newswires -- July 23, 1998
Apparel Stks Dn; Concerns About Sales Slowdown Cited
By Philana Patterson
NEW YORK (Dow Jones)--Several big-name apparel stocks were under
pressure Thursday as investors leapt out of the sector on concerns that clothing sales are slowing.
Tommy Hilfiger Corp.'s (TOM) NYSE-listed shares were among the
hardest hit, falling 6, or 10.3%, to 52 on volume of 2.4 million, compared with average daily volume of 287,800.
Nautica Enterprises Inc. (NAUT) also took part in Thursday's decline, with its shares recently falling 10.3%, or 2 7/8, to 25 1/8 on Nasdaq volume of 2.4 million, compared with average daily volume of nearly 357,000.
The downtrend extended to Polo Ralph Lauren Corp. (RL). The
company's NYSE-listed shares were down 5.8%, or 1 5/8, at 26 5/8 on
volume of 501,700 compared with average daily volume of 245,700.
Those declines came after NationsBanc Montgomery Securities Inc. analyst Susan Silverstein downgraded all three stocks to hold from buy. Silverstein was unavailable for immediate comment.
Investors bowing out seem to be concerned that retail sales will decline. The weakness in the sector comes one day after analysts cut estimates on Liz Claiborne Inc. (LIZ) after the company said it experienced weakness in its holiday orders.
Earlier this week, analysts also trimmed sales growth estimates for the second half by about one point for Jones Apparel Group Inc. (JNY) after the company said conditions in the off-price retail channels were getting more challenging. Liz Claiborne and Jones Apparel shares were also under pressure Thursday.
Liz Claiborne's NYSE-listed shares were down 2.2%, or 7/8, to 39 11/16, on volume of 2.7 million, compared with average daily volume of 342,100, after falling 20% Wednesday.
Jones Apparel's NYSE-listed stock was down 3.6%, or 1, at 26 13/16, on volume of 757,300, compared with average daily volume of 466,000.
Morgan Stanley Dean Witter analyst Josephine Esquivel said that after
seven years of "explosive" growth, the core men's sportswear market has slowed to more normal levels. She remains bullish on Hilfiger.
"Tommy Jeans are on fire, the women's business is phenomenal and the
kids business is booming," she said. "I don't believe that's going to change for the next two quarters."
Esquivel also said Liz Claiborne's issues were company specific and that the sales growth estimate cuts for Jones Apparel were minimal.
The challenges apparel makers may be facing is adjusting to a shift in styles and dealing with retailers being more conservative with inventory levels as opposed to a slow down in apparel sales, said Steve Paspal, an analyst with John Hancock Funds subsidiary Sovereign Asset Management.
"(VF Corp.) is sold out in certain styles for back-to-school," Paspal said, referring to VF Corp. (VFC), an apparel company. One of the company's stronger areas is jeans, while fleece has been weaker, he said.
- Philana Patterson; 201-938-5360
The Wall Street Journal -- July 23, 1998
Liz Claiborne Shares Plunge on Gloomier Forecast
----
By Wendy Bounds
Staff Reporter of The Wall Street Journal
NEW YORK -- Apparel powerhouse Liz Claiborne Inc.'s stock plummeted 20% after the company lowered its earnings projections for the remainder of 1998 in light of fewer orders from department stores in some dressy and denim lines and competition for off-price inventory sales.
Chief Executive Paul Charron warned that 1998 earnings per share would more likely hit $2.85 than the $3 previously expected. The warning was the first major nick in Liz Claiborne's strong performance of the past two years. Mr. Charron cited troubles with the company's Lizwear denim and casual-sportswear line, which he said had been inappropriately styled recently for its target 35- to 54-year-old consumer.
Separately, Mr. Charron noted that the company was actively seeking
acquisition possibilities, particularly in men's apparel or in the accessories business. As growth in Liz Claiborne's core $1 billion women'scasual business is slowing from double-digit to single-digit increases, the company needs new channels for expansion. Its men's business accounts for $150 million of the company's $2.4 billion in annual sales.
Possible brand partners for the company could include Nautica, Perry Ellis or Kenneth Cole. "Any of those are viable," said Mr. Charron, who added that the company had retained an investment bank and outside consultants to examine a possible alliance. As for accessories partners, analysts and industry observers have said that Nine West Group Inc. might fit with Liz Claiborne; the company also tried to buy handbag and leather-goods maker Dooney & Bourke recently but was unable to reach an agreement, Mr. Charron said.
"I would love to do a deal," Mr. Charron said. "But the problem is, how does it make financial sense. Do I overpay? Do I buy distressed property?"
Shares of Liz Claiborne closed at $40.625, down $10.125 in composite
trading on the New York Stock Exchange.
For the second quarter, the company's net income rose 7% to $31 million from $28.9 million a year earlier. Per-share earnings on a diluted basis met analysts' estimates, jumping to 47 cents from 41 cents, while revenue climbed to $565.2 million from $537.9 million. Notably, the company had 65.9 million shares outstanding in the most recent period, down from 70.6 million in 1997.
The trend in the workplace toward more casual dress has taken its toll on Liz Claiborne's upscale lines for women. "Dressy clothing just isn't selling nearly the way it did," Mr. Charron said. He added that the company would lower the prices on its dresses, which run between $144 to $198 now.
Meanwhile, sales of off-price merchandise slowed because of a glut of
products from competitors. "The prices we can get now because there's so much product out there are not good," Mr. Charron said.
Despite these trouble spots, Mr. Charron said the company would still
report a record year of earnings. In December, Liz Claiborne signed an exclusive 15-year licensing agreement to make and market Donna Karan International Inc.'s popular DKNY jeans and activewear lines. Mr. Charron said he expected the company's sales of DKNY to "outperform" the previously estimated target of $50 million to $60 million. He also said that the company would begin to see significant incremental sales increases from DKNY during the beginning of 1999. Moreover, the company signed a licensing deal with shoemaker and accessories manufacturer Candie's Inc. to develop and manufacture a collection of Candie's fragrance, cosmetics and beauty products world-wide.
Dow Jones Newswires -- July 22, 1998
Liz Claiborne Tumbles 16% On Weak '99 Earnings Outlook
By Philana Patterson
NEW YORK (Dow Jones)--Liz Claiborne Inc. (LIZ) shares fell 16%
Wednesday after the company said it expects fiscal 1999 net income to rise only 7.5% from a year earlier.
This is the first time the company has expressed this much caution about earnings growth, said Morgan Stanley Dean Witter analyst Josephine Esquivel.
"If you read between the lines, this basically means they're going to have a flat second half," she said.
The company's fiscal 1998 net income was $184.6 million, or $2.63 a
diluted share. First Call Corp.'s earnings estimate for the year is $3 a share.
The apparel manufacturer had previously guided analysts conservatively, saying it expected sales growth below 10% for the year, Esquivel said.
In response to the news, investors sent Liz Claiborne's NYSE-listed shares down 16%, or 8 1/8, to 42 5/8 on volume of 1.9 million, compared with average daily volume of 285,100.
On Wednesday, the company reported second-quarter net income of
$30.9 million, or 47 cents a diluted share, compared with $28.9 million, or 41 cents a share, a year earlier, matching First Call's estimates.
Jones Apparel Group Inc.'s (JNY) stock fell 14.1% to 28 15/16 on
Tuesday after the company said sales in the second half would be slower than in recent years. The stock continued its fall Wednesday. Jones Apparel's NYSE-listed shares were down 5%, or 1 7/16, at 27 1/2 on volume of 2 million, compared with average daily volume of 414,400.
"Jones was trying to make sure the expectations wouldn't get too out of hand," Esquivel said. "Jones feels very comfortable with the (earnings estimates) out there."
First Call puts Jones Apparel's 1998 net income at $1.43 a share. The
company earned $2.26 a diluted share in 1997.
Jones Apparel also announced Wednesday that Vice Chairman and
Director Herbert J. Goodfriend would step down from those posts and will become special assistant to the chairman for corporate development projects. Jones Apparel President Jackwyn Nemerov has been named to the board.
Tucker Anthony Inc. analyst Margaret Whitfield said Liz Claiborne didn't get the orders it hoped for the holiday season and that off-price retail channels are generating smaller returns than a year ago.
Part of the problem with orders is there was some disappointment among retailers with the company's LizWear jeans, Whitfield said. The company had moved to a more "contemporary" fit.
"That means slim to me," Whitfield said.
The Liz Claiborne customer tends to be a little older and prefers roomier bottoms. The company is fixing the problem by going "back to the classic silhouette" that has satisfied its customers.
Whitfield said Liz Claiborne's jeans line could also be seeing some pressure from new entries to the women's jeans market from Donna Karan
International Inc. (DK) and Jones Apparel. The company also continued to see weakness in dresses.
"Dresses have been weak for a couple of years now," said Liz Claiborne Chief Financial Officer Samuel Miller.
Liz Claiborne is experiencing growing pains from its launch of DKNY
jeans, which it has license to make. Whitfield said the company expects launch costs to dilute earnings by 13 cents to 15 cents a share in fiscal 1999. She reduced her rating on Liz Claiborne to market perform from market outperform and cut her fiscal 1999 earnings estimate to $2.83 a share from $3.
Miller said the changing environment among department stores and
off-price retailers has affected the company. Many retailers have been trying to buy less inventory and sell it more quickly, which has slowed growth for many vendors and left a glut of merchandise in the market.
Consolidation in the off-price sector, which has made pricing tougher for vendors, is also a factor, Miller said.
"It's much more concentrated with the merger of Marshall's and TJX," he said. "They have become more powerful."
Though they appear to be, Liz Claiborne's problems shouldn't be
pressuring the stock price of manufacturers Jones Apparel or Warnaco
Group Inc. (WAC), Whitfield said. NYSE-listed Warnaco was recently
down 2 1/4, or 5.5%, to 38 3/4 on volume of 828,000, compared with
average daily volume of 226,800.
Whitfield said the sales growth estimate cut for Jones Apparel was minimal and noted that on Tuesday, she actually increased her 1998 earnings estimate for the company to $1.43 a share from $1.40.
Liz Claiborne's goal is to return to 15% earnings growth in fiscal 2000, Miller said.
The company announced separately that it has entered into a licensing
agreement with Candie's Inc. (CAND) to make fragrance, cosmetic and
beauty products. The first product, a Candie's fragrance, is expected to be launched in Fall 1999.
-Philana Patterson; 201-938-5360
Dow Jones Newswires -- July 22, 1998
Liz Claiborne "Significant Deal" Likely By Yr-End - CEO
By Norihiko Shirouzu
-
TOKYO (Dow Jones)--Liz Claiborne Inc. (LIZ), a major U.S. maker of
apparel and accessories, said it is likely to announce a "significant deal" involving acquisition or licensing by year-end to add another name to its portfolio of fashion brands.
Liz Claiborne Chairman and CEO Paul Charron told Dow Jones
Newswires that the company is currently negotiating with a number of
fashion brands, at least one of which he said Liz Claiborne is likely to acquire or license over the next several months.
"It would be a department-store brand," Charron said in an interview in Tokyo. "I wouldn't buy a discount-store brand."
If executed, it would be a second brand-acquisition deal for Liz Claiborne this year. In January, the New York company obtained the exclusive, long-term rights to Donna Karan International Inc.'s (DK) DKNY Jeans and DKNY Active trademarks and is now allowed to manufacture and market both collections in the Western Hemisphere.
The company's primary fashion brand, Liz Claiborne, is hitting a point of saturation, as it has become "a well-developed department-store business," Charron said. The company can't grow Liz Claiborne "that much further," he said, unless it has more brands to work with.
"I have to get other brands and I have to go into other venues or same venues with other brands" for growth and market share gains, Charron
said.
(as a reward for reading thru to the bottom I thought
you'd enjoy reading this. Somebody got nailed but good.)
July 1, 1998
- A firm sold 1,000 August 55 calls on Liz Claiborne Inc. and bought stock in the fashion-apparel company. This bullish strategy, known as
buy-writing, lowers the cost of acquiring stock, but limits potential profits because the trader eventually has to sell the stock at the strike price, which is in this case is 55. |
