Liz Claiborne Inc., 2005 BAM 479 1/30/07
Liz Claiborne Inc., 2
Mission Statement
Liz Claiborne does not have a company-wide mission statement in place. From company information, a mission statement for Liz Claiborne may read as follows:
Liz Claiborne is an international company (markets) committed to designing and manufacturing the best apparel and accessories (products) for the fashionable person (customer), from a diverse portfolio of brands. (self-concept) We believe wholeheartedly in ethical and uplifting working condition (employees & philosophy) and charitable giving through the Liz Claiborne Foundation. (public image) We use the latest in design and fashion technology to create to stay on top of the fashion world. (self-concept) Through diversification and acquisitions we will remain the top fashion company in the world. (growth)
Case Statement
Liz Claiborne Inc.’s major challenge is to remain profitable and growing, while they face aspects of globalization, brand performance, and strong competition.
Critical Milestones
1976
Liz Clai laiborne Incorporated, New York City ity
Mid-1 Mid-19 976
Esta Establi blish shes es Hong Hong Kong Kong Prod Produc ucti tion on Cont Contro roll Offic Office e
1981
Liz Clai laiborne Incorporated goes Pub Public lic
1985
Men’s Clothing Introduced
1986
Cos Cosmeti metics cs Intr ntroduc oduced ed wit with Avon Joi Joint Vent enture ure
Late Late 1980s 980s
Introd Introduce uced d Women’ Women’s s Plus Plus Sizes, Sizes, Knit Sportsw Sportswear ear,, and Higher Higher-Pr -Price iced d Sportswear
1990s 990s
Acqu Acquir ired ed Craz Crazy y Horse Horse,, Russ Russ Togs, ogs, Villa Village gerr, Red Red Horse Horse,, Pode Podellll Indu Indust stri ries es,, Segrets, and Lucky Brand Dungarees
2000 2000
Acqu Acquir ired ed Fashi ashion on Jewe Jewele lerr Mone Monett and and Lice Licens nsed ed Liz Liz Clai Claibo born rne e Kids Kids
2000 2000s s
Acqu Acquir ired ed Mexx Mexx Grou Group, p, Ellen Ellen Tracy racy,, Travi ravis s Jean Jeans, s, and and Enyc Enyce e Hold Holding ings s
Liz Claiborne Inc., 3
Trend Statement
Liz Claiborne Incorporated’s growth can be attributed to its international manufacturing presence, product diversification, and acquiring of established brands.
Liz Claiborne Inc., 4
Internal Factor Evaluation Matrix Weight
Rating
Weighted Score
.21 .15 .08 .06 .03
4 4 3 3 3
.84 .60 .24 .18 .09
.18 .16 .05 .04 .04 1.00
1 1 2 2 2
.18 .16 .10 .08 .08 2.55
Strengths
1. Strong Fashions 2. Strong Brand Recognition 3. Almost all brands have a niche focus 4. Decentralized Management 5. Diverse Brand Portfolio Weaknesses
1. No Mission Statement 2. No Vision Statement 3. Brand Cannibalization 4. Lack of Focus 5. Lack of Brand Idea Sharing Explanations if Needed Strengths
1. Strong Fashions – Within any fashion company, the right fashion styles is key to their success. 2. Strong Brand Recognition 3. Almost all brands have a niche focus – Almost all brand units with Liz Claiborne focus their efforts in one niche market to minimize brand cannibalization. 4. Decentralized Management – Liz Claiborne is able to make decision extremely fast. Business units make their own decisions. 5. Diverse Brand Portfolio
Weaknesses
1. No Mission Statement – Liz Claiborne has no company-wide mission. 2. No Vision Statement – Liz Claiborne has no company-wide vision. 3. Brand Cannibalization- Each brand taking away sales from one another. 4. Lack of Focus – Liz Claiborne as a company is not focused on one particular area of the fashion apparel market. 5. Lack of Brand Idea Sharing – Business units with Liz Claiborne are slow to share ideas.
Liz Claiborne Inc., 5
Liz Claiborne seems to be doing fine with respect to its internal strengths and weaknesses. Key areas that need to be addressed are the lack of a mission and vision statement.
Liz Claiborne Inc., 6
External Factor Evaluation Matrix Weight
Rating
Weighted Score
1. Expand into Emerging Economies 2. Enter New Product Markets
.17 .12
3 4
.51 .48
3. Acquire More Companies 4. E-commerce Sales 5. Expand Stand-alone Stores
.10 .08 .03
4 1 3
.40 .08 .09
.15 .12 .1 .10 .08 .05 1.00
3 3 4 3 2
.45 .36 .40 .24 .10 3.11
Opportunities
Threats
1. Competitors 2. Lose Fashion Edge 3. Politics/ Trade Agreements of Countries 4. International Economies 5. Brand Cannibalization
Explanations if Needed Opportunities
1. Expand into Emerging Economies 2. Enter New Product Markets 3. Acquire More Companies 4. E-commerce Sales – Increase Liz Claiborne’s online e-commerce presence. 5. Expand Stand-alone Stores – Add new stores for Liz Claiborne’s existing brands that have stores and those that do not.
Threats
1. Competitors 2. Lose Fashion Edge – Since fashion is the key to a fashion business, there are always the threats that Liz Claiborne will lose its fashion edge. 3. Politics/ Trade Agreements of Countries – Changes in the world economy and politics could hamper Liz Claiborne’s company strategies. E.g. tariffs, quotas, wars, embargos, etc. 4. International Economies – Liz Claiborne’s international presence could stumbled with the economies of those particular regions that they are involved in.
Liz Claiborne Inc., 7
5. Brand Cannibalization – Individual business units could take sales away from one another.
Liz Claiborne is doing well over in their external environment. There a few areas that need to be addressed such as the threat of brand cannibalization within all of the brands that they own, and the lack of a true e-commerce presence that is rich in profits.
Liz Claiborne Inc., 8
Financial Analysis
Financial Ratios *Using 2005 Data
Current Ratio
LIZ LIZ
Indu Indust stry ry (RMA, RMA, SIC SIC 233 2331, 2335 2335,, 233 2337)
2.37
4.5, 1.7, 1.3
For every dollar of current debt or liability, Liz Claiborne has $2.37 of current assets to pay for that debt. This number is above the industry average of 1.7, which indicates that Liz Claiborne is doing a great job of managing its assets.
Quick Ratio
1.52
2.8, .9, .4
For every dollar of current debt or liability, Liz Claiborne has $1.52 of current assets without its inventory to pay for that debt. This number is above the industry averages of .9, which indicates that Liz Claiborne is doing a great job of managing its very liquid assets.
Debt-to-Assets
.18
For every dollar of assets, Liz Claiborne has $.18 of debt issued.
Debt-to-Equity
.30
.5, 1.4, 3.4
For every dollar of equity, Liz Claiborne has $.30 of debt issued.
Long-Term Long-Term Debt-to-Equity
.27
For every dollar of equity, Liz Claiborne has $.27 of long-term debt issued. In comparison to the previous ratio, the majority of debt issued to Liz Claiborne is in the form of long-term debt.
Times-Covered Ratio
15.64
12.2, 5.7, 2.4
For every dollar of interested that Liz Claiborne is liable for, there is $15.64 of profit to pay for the interest. Compared to the industry average of 5.7, Liz Claiborne is excelling in this area by a wide margin. This could be in part from the extensive use of long-term debt (lower interest
Liz Claiborne Inc., 9
rates) compared to short-term debt.
Inventory Turnover Ratio
8.56
10.6, 7.6, 5.2
For every dollar in inventory, Liz Claiborne generates $8.56 in sales. Compared to the industry average of 7.6, Liz Claiborne is slightly above average indicating a good inventory turnaround.
Fixed Asset Turnover
4.48
420.7, 94.5, 50.7
For every dollar of fixed assets, Liz Claiborne is able to generate $4.48 in sales. The industry numbers seem to be skewed, or fixed asset turnover numbers weren’t placed in the proper place in this document. If the industry numbers are correct then Liz Claiborne’s $4.48 is far below the industry average of 94.5.
Total Asset Turnover
1.53
5.5, 3.8, 2.4
For every dollar of assets, Liz Claiborne is able to generate $1.53 in sales. The industry average is 3.8 which is far greater that that Liz Claiborne. Compared to the previous ratio, Liz Claiborne must have a much greater amount of cash, inventory and non-fixed assets.
Capital Intensity Ratio
.65
Liz Claiborne needs $.65 of assets to generate a dollar in sales. This number indicates that Liz Claiborne is not growing as fast as a startup, and that the industry is not capital intensive.
Gross Profit Margin
46.25%
For every dollar of sales, 46.25% of the sale goes into Liz Claiborne’s gross profit.
Net Profit Margin
6.77%
For every dollar of sales, 6.77% of the sale goes into Liz Claiborne’s net profit, profits after taxes and interest.
Liz Claiborne Inc., 10
Return on Total Assets
.10
15.9, 10, 5.4
For every dollar of assets, Liz Claiborne is able to generate $.10 of net income. The industry numbers seem to be skewed, or return on total assets numbers weren’t placed in the proper place in this document. If the industry numbers are correct then Liz Claiborne is far below the industry average of 10 and this needs to be addressed.
Return on Stockholders’ Equity
.17
54.1, 16.9, 11.8
For every dollar of equity, Liz Claiborne is able to generate $.17 of net income. The industry numbers seem to be skewed, or return on stockholders’ equity numbers weren’t placed in the proper place in this document. If the industry numbers are correct then Liz Claiborne is far below the industry average of 16.9 and this needs to be addressed.
Liz Claiborne Inc., 11
Vertical Analysis (Income Statement) In Millions of USD (except for per share items) 1/1/05 N et Sales
4,632.83
Cost of Goods Sold Gross Profit
2,490.27 2,142.56 2,142.56
% of 100.00% 53.75%
1/3/04 4,241.11
46.25%
2,351.32 1,889.79
1,630 ,630..12 9.69 4,130.0 30.08 8 502.75
35. 35.19% 0.21% 89. 89.15% 10.85%
Interest Income(Expense), Net Non-Operating
-32.15
Other, Net Income Before Tax
9.6 480.2
% of
12/28/02
% of
100.00% 55.44%
3,717.50
100.00% 56.43%
44.56%
2,097.87 1,619.63
1,41 ,419.67 9.67 -0.67 3,77 3,770. 0.32 32 470.79
33.4 33.47% 7% -0 -0.02% 88.9 88.90% 0% 11.10%
1,2 1,222 22.6 .62 2 7.13 3,32 3,327 7.61 .61 389.89
32.8 32.89% 9% 0.19% 89.5 89.51% 1% 10.49%
-0.69%
-30.51
-0.72%
-25.12
-0.68%
0.21% 10.37% 3.60%
-1.89 438.39
-0.04% 10.34% 3.74%
-2.32 362.45
-0.06% 9.75% 3.53%
43.57%
Selling/General/Admin. Expe Expens nses es,, Total otal Unusual Expense (Income) Total otal Oper Operat atin ing g Expe Expens nse e Operating Income
Provision for Income Tax N et Income
166.63 313.57
6.77%
158.7 279.69
6.59%
131.29 231.16
6.22%
Net Income per Commom Share:
Basic Diluted Dividends Paid per Common Share
$2.90 $2.85
$2.60 $2.55
$2.19 $2.16
$0.23
$0.23
$0.23
Liz Claiborne is doing a great job of increasing net income and decreasing cost of goods sold even as they have grown through acquisitions recently. Nothing seems too concerning for Liz Claiborne through this analysis.
Liz Claiborne Inc., 12
Vertical Analysis (Balance Sheet) In Millions of USD (except for per share items)
1/1/05
% of
1/3/04
% of
12/28/02
% of
11.26% 1. 1.93% 14.99% 18.6 8.61% 4.93%
9. 9.33% 1. 1.62% 16.33% 20.3 20.33 3% 4.20%
51.72%
211.56 36.81 370.47 461.15 95.22 1,175.21
Assets Current Assets:
Cash & Equ Equivalents Shor t Term Investments Accounts Receivable Tota otal Invent entory ory Other Current Assets, Total Total Current Assets
385.64 7.8 432.06 541 541.14 142.5 1,509.14
12.73% 0. 0.26% 14.26% 17.86% 86% 4.70% 49.81%
293.5 50.41 390.8 485. 485.18 128.5 1,348.40
Total - Gross Goodwill, Net
1,034.46 755.65
34.14% 24.94%
896.52 596.44
34.39% 22.88%
812.15 478.87
35.80% 21.11%
Intangibles, Net Other Long Term Assets, Total Total Assets
280.99 9.4 3,029.75
9.27% 0.31%
244.17 7.25 2,607.00
9.37% 0.28%
226.58 9.4 2,268.36
9.99% 0.41% 100.00%
51.81%
Property/Plant/Equipment,
100.00%
100.00%
Liabilities and Stockholders' Equity Current Liabilities:
Accounts Payable Accrued Expenses Notes Payable/Short Term Debt Other Curre rrent liabilities, Total Total Current Liabilities
259.96 288.49
8.58% 9.52%
227.12 236.13
8.71% 9.06%
225.03 283.46
9.92% 12.50%
56.12 33.03 637.6 637.6
1.85% 1.09%
0.73% 1.12%
21.99 26.24 556.72
0.97% 1.16%
Long Term Debt Capi Capita tall Leas Lease e Obli Obliga gati tion ons s
476.57 7.95 .95
21.04% 15.73% 0.26 0.26% %
18.91 29.32 511.49
Total Long Term Debt
484.52
15.99%
440.3
Total Debt
540.63
459.22
49.49 13.52 32.84
17.84% 1. 1.63% 0.45% 1. 1.08%
1,217.96 1,217.96
40.20%
Deferred Income Tax Minority Interest Other Liabilities, Total Total Liabilities Liabil ities
377.73
24.54% 16.65% n/a n/a
16.89%
377.73
16.65%
399.71
43.86 9.85 23.53
17.61% 1. 1.68% 0.38% 0. 0.90%
33.71 7.43 6.41
17.62% 1. 1.49% 0.33% 0. 0.28%
1,029.03
39.47%
982
43.29%
176.44 124.82
6.7 6.77% 4.79%
176.44 95.71
7.78% 4.22%
440.3 -
19.62% 16.89% n/a n/a
-
Stockholders' Equity:
Common Stock, Total Add Additional Paid-In Capital Retained Earnings (Acc (Accum umul ulat ated ed Defi Defici cit) t) Treasury reasury Stock Stock - Common Common Other Equity, Total Total Equity
176.44 176.18 2,82 2,828. 8.9 97 -1,26 -1,269.3 9.36 6 -100.44 1,811.79 1,811.79
5.8 5.82% 5.82% 93.3 93.37% 7% -41 -41.90% .90% -3.32% 59.80%
2,53 2,539. 9.7 74 -1, -1,191.23 91.23 -71.8 1,577.97
97.42% .42% -45.69 -45.69% % -2.75% 60.53%
2,28 2,283. 3.69 69 -1,23 -1,230. 0.97 97 -38.5 1,286.36
100.6 00.68% 8% -54.2 -54.27% 7% -1.70% 56.71%
Liz Claiborne Inc., 13
Total Liabilities & Shareholders' Equity
3,029.75
100.00%
2,607.00
100.00%
2,268.36
100.00%
Liz Claiborne Inc., 14
Horizontal Analysis (Income Statement) In Millions of USD (except for per share items) % 1/1/05 N et Sales
4,632.83
Cost of Goods Sold Gross Profit
2,490.27 2,142.56 2,142.56
Sellin Selling/G g/Gene eneral ral/Ad /Admin min.. Expens Expenses, es, Total otal Unusual Expense (Income) Total otal Oper Operat atin ing g Expe Expens nse e Operating Income
1,630. ,630.12 12 9.69 4,130.0 30.08 8 502.75
Interest Income(Expense), Net NonOperating Other, Net Income Before Tax
-32.15 9.6 480.2
change 9.24% 5.91% 13.38% 14.82% 4.82% n/a 9.54 9.54% % 6.79% 5.38%
Provision for Income Tax
166.63
9.54% 5.00%
N et Income
313.57
% 1/3/04 4,241.11
2,351.32 1,889.79 1,41 ,419.67 9.67 -0.67 3,77 3,770. 0.32 32 470.79 -30.51 -1.89 438.39
change 14.09%
12/28/02
12 12.08% 16.68% 16.1 6.12% n/a 13.30 3.30% % 20.75%
2,097.87 1,619.63
21.46%
3,717.50
1,222.6 ,222.62 2 7.13 3,32 3,327 7.61 .61 389.89 -25.12 -2.32 362.45
158.7
20.95% 20.88%
12.11%
279.69
20.99%
231.16
$2.90 $2.85
11.54% 11.76%
$2.60 $2.55
18.72% 18.06%
$2.19 $2.16
$0.23
0.00%
$0.23
0.00%
$0.23
131.29
Net Income per Commom Share:
Basic Diluted Dividends Paid per Common Share
Liz Claiborne seems to be doing a great job of managing their growth while increasing net income as a greater percentage over cost of goods sold.
Liz Claiborne Inc., 15
Horizontal Analysis (Balance Sheet) In Millions of USD (except for per share items) 1/1/05
% change
1/3/04
% change
385.64 7.8
31.39% -84.53%
293.5 50.41
38.73% 36.95%
211.56 36.81
Accounts Receivable Total Inventory Other Curre rrent Ass Assets, Total Total Current Assets
432.06 541.14 142.5 1,509.14
10.56% 11.53% 10.89%
5.49% 5.21% 34.95%
11.92%
390.8 485.18 128.5 1,348.40
14.74%
370.47 461.15 95.22 1,175.21
Property/Plant/Equipment, Total Gross
1,034.46
15.39%
896.52
10.39%
812.15
755.65 280.99 9.4
26.69% 15.08% 29 29.66%
596.44 244.17 7.25
24.55% 7.76% -22.87%
47 478.87 226.58 9.4
3,029.75
16.22%
2,607.00
14.93%
2,268.36
227.12 236.13 18.9 8.91 29.32 511.49
0.93% -16 -16.70% -1 -14.01 .01% 11 11.74%
225.03 283.46 21.99 26.24 556.72
12/28/02
Assets Current Assets:
Cash & Equivalents Shor t Term Investments
Goodwill, Net Intangibles, Net Other Long Term Assets, Total Total Assets Liabilities and Stockholders' Equity Current Liabilities:
Accounts Payable Acc Accrued Expenses Not Notes Payable able//Sho Short Term erm Debt Debt Other Curre rrent liabilities, Total Total Current Liabilities
259.96 288.49 56. 56.12 33.03 637.6 637.6
14.46% 22.17% 196. 96.77% 77% 12 12.65%
476.57
24.66% 8.24%
Capital Lease Obligations Total Long Term Debt
7.95 484.52
n/a 10.04%
Total Debt
540.63
459.22
49.49 13.52 32.84
17.73% 12.84% 37.26% 39.57%
1,217.96 1,217.96
18.36%
1,029.03
176.44 176.18
0.00% 41.15%
176.44 124.82 4.82
0.00% 30. 30.41%
176.44 95. 95.71
2,828 ,828..97 -1,2 -1,269 69.3 .36 6 -100.44
11.39% 39% 6.56 6.56% % 39.89%
2,539 ,539..74 -1, -1,191.23 .23 -71.8
11.21% -3.2 -3.23% 3% 86.49%
2,28 2,283. 3.6 69 -1,2 -1,230 30.9 .97 7 -38.5
1,811.79 1,811.79
14.82%
1,577.97
22.67%
1,286.36
3,029.75
16.22%
2,607.00
14.93%
2,268.36
Long Term Debt
Deferred Income Tax Minority Interest Other Liabilities, Total Total Liabilities Liabil ities
440.3
-8.12% 16.56%
440.3
n/a 16.56%
-
43.86 9.85 23.53
14.89% 30.11% 32.57% 267.08% 4.79%
377.73 377.73 399.71
33.71 7.43 6.41 982
Stockholders' Equity:
Common Stock, Total Add Additi itional onal Paidaid-In In Capi Capittal Retained Earnings (Accumulated Defi Defici cit) t) Treas reasur ury y Stoc Stock k - Comm Common on Other Equity, Total Total Equity Total Liabilities & Shareholders' Equity
Liz Claiborne Inc., 16
Sources Cited
Liz Claiborne Inc. Corporate Website (http://www.lizclaiborneinc.com) Strategic Management, Concepts and Cases, p. 112-123 Google Financial, LIZ (http://finance.google.com/finance?q=LIZ)
