Liz Claiborne Continues To Worry

Liz Claiborne (LIZ) announced Q1 earnings and for a retailer in this environment were not bad. The consumer is not as fashion conscious at the present time. They seem to be doing the right things, reducing inventories and bringing in some top industry guns as well as launching some new brands/lines.

They also negotiated their revolving credit agreement but the press release contained some very vague information as to what the covenants are. So it really is impossible to understand how the deal will work. Liz is highly leveraged despite large debt reductions. There is a great deal of seasonality in its financing. The big event is always the fall and Christmas season. If they blow it then they will destabilize.

Add to the volatile mix a horrendous economy and you have a poorly capitalized company that is not explaining to investors how their credit works. As William L. McComb, Chief Executive Officer of Liz Claiborne Inc., said: , "Our outlook for the balance of the year remains unchanged. We expect comp store sales declines"