- 1) First off, as it relates to P&L/Balance Sheet triangulation, LIZ is starting off in a similar place as JNY (see chart below – and see JNY post for info on how to interpret the chart). I think inventories are in check – in part supported by the year/year change in average selling price heading higher. At the same time, LIZ cycles against massive margin headwinds, which should solidify LIZ in the ‘sweet spot’ of its margin/inventory cycle.
- 2) Wholesale business is still extremely poor, but sales decline in the core Liz Claiborne brand have stabilized since the last conference call. See Exhibit 2.
- 3) Check out my 5/13 post as to why I like this name over the next 1-2 years. It has arguably more fat than any other company in the space. With a new CEO who is bordering on not being ‘new’ anymore, he has to either a) show that his recent investments are working, b) cut costs if his bet was wrong, or c) lose his job. I think any of them is a positive stock event. The Board has changes incentives to facilitate 2009 as the break-out margin year – and I think this is attainable even with supply chain pressures.
- Full disclosure is that my Partner Keith McCullough (he’s the expert on the stock – and me on the fundamentals) is not a fan of this name now from a quant standpoint. I’ll bow out of the debate as to whether it is going up or down by a couple bucks near-term, but the 1-2 year margin call is going to be tough to justify only a $13 stock if I am right.
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