Liz Claiborne at Sanford C. Bernstein & Co. 20th Annual Strategic Decisions Conference 2004 - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

EMME KOZLOFF, SENIOR RETAIL ANALYST, SANFORD BERNSTEIN: Good afternoon. I am Emme Kozloff, Senior Retail Analyst at Sanford Bernstein. I'm delighted to introduce our next company, Liz Claiborne. Representing the company today are Paul Charron, Chairman and CEO; Frank Sowinski, Executive Vice President; and Michael Scarpa, Vice President and CFO. And where's Bob? Bob Vills is in the back, Vice President of Treasury and Investor Relations.

Liz Claiborne is based here in New York. It's a leading global wholesaler and retailer of fashion apparel and accessories with sales of $4.2 billion in '03, and a current market cap of about $4 billion. The company operates its business through a diverse portfolio of 36 brands available in over 30,000 different retail locations around the world. Since 1994, the company has grown its portfolio of brands, both organically and through acquisition, while increasing earnings per share at an annual growth rate of 19 percent. The questions that have arisen lately for Liz include the state of the company's core Liz brand and whether it will continue to get squeezed by smaller brand introductions at retail. Many investors also want to know what type of acquisition opportunities Liz sees going forward. Finally, people want to know whether Liz can deliver material operating margin improvement in current levels.

So, to hopefully get some answers to these questions, please welcome Paul Charron.

PAUL CHARRON, CHAIRMAN & CEO, LIZ CLAIBORNE: Thank you very much. It is a pleasure to be here, and I am very flattered that you've opted to stick with us from Liz as opposed to listening to (inaudible). I can't tell you that what we have to say will be more interesting than what former President Clinton has to say, but I think that what we have to say is more directed to the Liz Claiborne (inaudible). We're very happy to be here at this conference because there are -- (inaudible) is a much more broadscale conference than many of those that we normally participate in. So I'm very appreciative of the opportunity to talk to you all about Liz Claiborne. Because there may be some new investors or potential investors, I'm going to take this opportunity to talk a little bit about our portfolio. For those of you who we see with some frequency -- I see (inaudible) in the front row -- some of this is old news, but I trust the story like many stories gets better with the retelling.

So let me tell you that I'm going to provide a brief overview of our strategic vision and progress, followed by a discussion of our core competency in consumer response and product development of supply chain management. We will conclude with a discussion of our strong platform for growth, our financial results and financial strength. Throughout this presentation, we will talk a great deal about the consumer. For those of you that don't know, I'm not a native of (inaudible) apparel. I started out at Procter & Gamble (inaudible) and spent my first 10 years in packaged goods, and then basically have spent the last 20 years moving in and around unconventional applications of classical packaged goods thinking. It's not surprising, therefore, that you would end up with a portfolio of brands which serve distinct consumer niches from a former P&G person. I have been managing diverse portfolios for the last 25 years, multibrand, multichannel portfolios for the last 25 years, and it seems to hold us in good stead here at Liz Claiborne.

Our strategic vision at this company is to become the world's leading branded fashion apparel and accessories company. We will achieve this goal by focusing on our core competencies in sourcing, design, logistics and brand management, building a balanced portfolio of powerful brands that provide the flexibility to adapt quickly and profitably to the inherent complexity and vagaries of the fashion industry. Liz Claiborne has been able to succeed because we consistently deliver trend- right, high-value fashion merchandise that sets our brands apart in each of the segments, the consumer segments and channels where we choose to compete.

(technical difficulty) As Emme said, in 2003 we generated sales of about $4.2 billion. For a perspective, in 1994 our sales were about $2 billion. Our business is segmented into Wholesale Apparel which generates 67 percent of sales, Wholesale Non-Apparel with 13 percent, and retail with 20 percent of our sales. Our Wholesale Apparel segment include multiple brands sold through the department store and specialty store channels, both domestically and internationally, as well as our special market brands which are sold at moderate price points to promotional department stores and mass merchandisers.

What that says in English is that we sell wholesale from everyone from Nieman's and Saks at the top through all the mainstream department stores, to JC Penney, Kohl's, Mervyns, and Sears. We also sell to Target. So we run the gamut domestically and internationally from top to bottom of the socioeconomic value chain. Our Wholesale Non-Apparel segment is comprised of handbags, fashion accessories like hats, belts, scarves, thinks like that, jewelry and fragrances, which are sold primarily to department stores. We also sell more moderately priced handbags, jewelry, and fashion accessories to promotional department stores and mass merchants like Kohl's and Sears and JC Penney.

Our continued success in this nonapparel segment primarily reflects our ability to replicate our core portfolio diversification strategy in these businesses. Each product in this segment of nonapparel is brand true, reflecting the unique styling that characterizes the brands. This is achieved through a collaborative culture in our company, whereby apparel and accessories teams for each brand work closely together to ensure design continuity and integrity.

We are also a retailer. Our retail segment includes 232 specialty retail stores and 266 outlet stores in 11 different branded formats. Liz Claiborne, Elisabeth, Dana Buchman, Sigrid Olsen, Lucky Brand, Claiborne Mens, DKNY Jeans, Laundry by Shelli Segal; special brands, Ellen Tracy and Mexx. Later on, I'll discuss with you in more detail some of the exciting opportunities we are pursuing in the retail segment.

Now comprised of 36 different brands in seven different channels of distribution, the company's portfolio representing apparel and nonapparel, wholesale and retail, men's and women's, domestic and international, allows us to appeal to consumers regardless of their tastes, regardless of the size of their pocketbooks, regardless of where the consumer chooses to shop. We are not overly dependent on any one channel, any economy or any customer. Our portfolio today is more balanced and diverse than has ever been the case. As you can see from these charts, our sales are much more balanced today across the bridge, better, and moderate sectors than was the case in 1997. Importantly, our international sales have increased from 5 percent of total sales in 1997 to 22 percent in 2003. This primarily reflects the impact of our acquisition of Mexx International, which continues to grow at healthy double-digit rates. Mexx is primarily a European company. It is based in Amsterdam, Holland, and it is the second-largest brand in the corporation, with sales on the order of $800 million.

International expansion has been and will continue to be a major source of our growth, particularly in Europe. To help us reach this goal, we will build upon Mexx's unique understanding of the differences and the similarities between and among European markets. Indeed, the Mexx organization in Holland as we speak is being transformed to function as a multibrand platform for marketing selected U.S. brands in Europe. Mexx has been a single-brand platform. It has grown dramatically. It continues to grow organically at double-digit rates. We are now moving Liz Claiborne Europe and Mexx together, so that Liz Claiborne Europe becomes a subset of Mexx International, and through Mexx International will drive other relevant brands in our portfolio into and through Europe.

Liz Claiborne Europe is moving …