- Reports Q3 Adjusted EPS from Continuing Operations Within Guided Range

- GAAP Loss per Share of ($0.10)

- Adjusted EPS of $0.39

- Generates Cash Flow from Continuing Operating Activities over the Latest Twelve Months of $293 Million

- Drives Decreases in Inventory of 24% and Accounts Receivable of 27% Compared to Q3 2007

- Confirms Q4 Adjusted EPS from Continuing Operations Guidance Range of $0.19 to $0.24 and Tightens Full Year 2008 Adjusted EPS Range to $1.02 to $1.07

NEW YORK, Nov. 10 /PRNewswire-FirstCall/ -- Liz Claiborne Inc. (NYSE: LIZ) today announced earnings for the third quarter and first nine months of 2008. For the third quarter of 2008 and on a GAAP basis, the loss per share from continuing operations was ($0.10) compared to diluted earnings per share ('EPS') from continuing operations of $0.33 for the third quarter of 2007. Adjusted diluted EPS from continuing operations for the third quarter of 2008 were $0.39 compared to adjusted diluted EPS from continuing operations of $0.60 for the third quarter of 2007. Net sales from continuing operations for the third quarter of 2008 were approximately $1.015 billion, a decrease of $192 million, or 15.9%, from the comparable 2007 period, inclusive of a $181 million decrease associated with brands or certain brand activities that have been licensed, closed or exited and have not been presented as part of discontinued operations.

For the first nine months of 2008, the loss per share from continuing operations was ($0.33) compared to diluted EPS from continuing operations of $0.48 for the first nine months of 2007. Adjusted diluted EPS from continuing operations for the first nine months of 2008 were $0.83 compared to adjusted diluted EPS from continuing operations of $0.94 for the first nine months of 2007. These results include the $0.09 per share benefit from the reclassification of the first half of 2008 results of the Enyce and Narciso Rodriguez brands to discontinued operations. Net sales from continuing operations for the first nine months of 2008 were approximately $3.074 billion, a decrease of $196 million, or 6.0%, from the comparable 2007 period, inclusive of a $299 million decrease associated with brands or certain brand activities that have been licensed, closed or exited and have not been presented as part of discontinued operations.

The Company is tightening its adjusted diluted EPS guidance for the full year 2008 to a range of $1.02 - $1.07. The adjusted results for the third quarter and first nine months of 2008 and 2007 and the adjusted projected full year 2008 results on a continuing operations basis exclude the impact of expenses incurred in connection with the Company's streamlining and brand- exiting activities and non-cash trademark impairment charges.

The Company believes that the adjusted results for the third quarter and first nine months of 2008 and 2007 and the adjusted projected results for fiscal 2008 represent a more meaningful presentation of its historical and estimated operations and financial performance since these results provide period to period comparisons that are consistent and more easily understood. The attached tables, captioned 'Reconciliation of Non-GAAP Financial Information', provide a full reconciliation of actual results to the adjusted results.

William L. McComb, Chief Executive Officer of Liz Claiborne Inc., said: 'Third quarter adjusted EPS from continuing operations were $0.39 in this significantly challenging macroeconomic environment, primarily driven by better than forecasted expense controls, which offset a top line which was below our expectations. We continued to benefit from our streamlining activities, which generated a $25 million year over year reduction in adjusted SG&A in the quarter. As we indicated in our October 24th pre-announcement, our balance sheet remains strong and we continued to drive improvements in working capital in the third quarter, as evidenced by the 24% reduction in inventory and 27% reduction in accounts receivable compared to last year, which include the impact of brands sold, discontinued, or licensed. We expect our seasonally strong fourth quarter cash flow to result in a total debt balance of $750 to $775 million at year end, a reduction of approximately $110 to $135 million in total debt from the end of last year. For the full year 2008, we expect to generate $300 to $325 million of cash flow from continuing operating activities. We were in compliance with our bank credit facility financial covenants for the 3rd quarter and expect to be in compliance in the 4th quarter as well.'

Mr. McComb continued, 'We will continue our intense focus on controlling the controllables...inventory, accounts receivable, astute brand execution and generating free cash flow to pay down debt. In terms of product and brand execution, we've spent the past year developing outstanding product for this Spring--and although the environment will temper our results, we are as optimistic as we can be about how our brands will present at retail.'

Mr. McComb concluded, 'We are confirming our recently updated fourth quarter adjusted EPS from continuing operations guidance in the range of $0.19 to $0.24. This results in an adjusted EPS from continuing operations guidance range of $1.02 to $1.07 for the full year 2008. The current operating environment has been negatively impacted by significant declines in consumer confidence and discretionary spending. As we stated earlier, given the lack of visibility caused by the highly uncertain environment, we are not providing 2009 guidance at this point.'

The Company will sponsor a conference call at 10:00 am EST on November 11th to discuss its results for the third quarter and first nine months of 2008. The dial-in number is 1-888-694-4676 with pass code 70595657. The web cast and slides accompanying the prepared remarks can be accessed via the Investor Relations section of the Liz Claiborne website at www.lizclaiborneinc.com. An archive of the webcast will be available on the website. Additional information on the results of the Company's operations is available in the Company's Form 10-Q for the third quarter of 2008, filed with the Securities and Exchange Commission.

OPERATING SUMMARY

-- The Company aggregates its brand-based activities into two reporting segments as follows:

      - The Direct Brands segment - consists of the specialty retail, outlet,
        wholesale apparel, wholesale non-apparel (including accessories,
        jewelry and handbags), e-commerce and licensing operations of the
        Company's four retail-based brands: Mexx, Juicy Couture, Lucky Brand
        and Kate Spade.
      - The Partnered Brands segment - consists of the wholesale apparel,
        wholesale non-apparel, outlet, specialty retail, e-commerce and
        licensing operations of the Company's owned and licensed wholesale
        based brands.

The results of the Company's former Emma James, Intuitions, J.H. Collectibles, Tapemeasure, C&C California, Laundry by Design, Prana, Narciso Rodriguez and Enyce brands in addition to the retail operations of the Company's former Ellen Tracy brand and certain of the retail operations of the Sigrid Olsen brand are shown as discontinued operations.

In the second quarter of 2008, the Company entered into an exclusive long- term global licensing agreement for the manufacture, distribution and marketing of its fragrance brands. Although we believe this arrangement provides us the opportunity to realize more consistent and profitable results, it will continue to negatively affect year over year net sales comparisons, as we now earn a royalty fee based on the sales of our fragrance products by Elizabeth Arden.

-- Net sales from continuing operations for the third quarter of 2008 were $1.015 billion, a decrease of $192 million, or 15.9% from 2007, inclusive of a $181 million decrease associated with brands or certain brand activities that have been licensed, closed or exited and have not been presented as part of discontinued operations. The impact of changes in foreign currency exchange rates in our international businesses increased net sales by approximately $25 million, or 2.0%, during the quarter. Net sales for our segments are provided below:

      - Direct Brands segment net sales decreased 1.8% in the third quarter to
        $617 million. Excluding the impact of licensing our fragrance
        operations in the second quarter of 2008, net sales increased 1.7%.
      - Partnered Brands segment net sales decreased $180 million, or 31.2%,
        in the third quarter to $398 million, inclusive of a $159 million
        decrease associated with brands or certain brand activities that have
        been licensed, closed or exited and have not been presented as part of
        discontinued operations.

-- Net sales for our Direct Brands segment in the third quarter were as follows:

      - impact of changes in foreign currency exchange rates, net sales for
        Mexx were $311 million, a 15.0% decrease compared to last year.
      - Juicy Couture - $144 million, a 6.8% increase compared to last year.
        Excluding the impact of licensing our fragrance operations in the
        second quarter of 2008, net sales increased 20.0%.
      - Lucky Brand - $111 million, a 2.3% increase compared to last year.
        Excluding the impact of licensing our fragrance operations in the
        second quarter of 2008, net sales increased 9.7%.
      - Kate Spade - $29 million, a 47.0% increase compared to last year.

-- Operating income in the third quarter was $16 million (1.6% of net sales) compared to operating income of $71 million (5.9% of net sales) in 2007. Adjusted operating income in the third quarter was $62 million (6.1% of adjusted net sales) compared to $114 million (9.5% of adjusted net sales) in 2007. Operating income for our business segments are provided below:

      - Direct Brands segment operating income in the third quarter was $35
        million (5.7% of net sales), compared to $87 million (13.8% of net
        sales) in 2007. Direct Brands segment adjusted operating income in the
        third quarter was $53 million (8.5% of adjusted net sales) compared to
        $95 million (15.1% of adjusted net sales) in 2007.
      - Partnered Brands segment operating loss in the third quarter was ($19)
        million ((4.7)% of net sales), compared to an operating loss of ($16)
        million ((2.8)% of net sales) in 2007. Partnered Brands segment
        adjusted operating income in the third quarter was $9 million (2.3% of
        adjusted net sales) compared to adjusted operating income of $19
        million (3.3% of adjusted net sales) in 2007.

-- Expenses associated with our streamlining and brand-exiting activities were $36 million in the third quarter of 2008 compared to $31 million in the third quarter of 2007.

-- Inventories decreased 24.3% to $549 million compared to the third quarter of 2007, primarily reflecting decreases in our Partnered Brands segment, including the impact of brands sold, discontinued, or licensed, partially offset by increases in our Direct Brands segment. Inventories of ongoing Partnered Brands decreased 37.0% compared to the third quarter of 2007. The impact of changes in foreign currency exchange rates decreased inventories by $8 million, or 1.1%, in the third quarter of 2008 compared to the third quarter of 2007.

-- Accounts receivable decreased 27.1% to $483 million compared to the third quarter of 2007, reflecting decreases in our Direct and Partnered Brands segments, including the impact of brands sold, discontinued, or licensed. The impact of changes in foreign currency exchange rates decreased accounts receivable by $6 million, or 0.9%, in the third quarter of 2008 compared to the third quarter of 2007.

-- Cash flow from continuing operating activities for the last twelve months was $293 million.

-- We ended the quarter with $50 million in cash and with $974 million of debt outstanding. Our total debt to total capital ratio was 41.4% in the third quarter compared to 32.2% in 2007, primarily reflecting the impact of the 2007 goodwill impairment in addition to share repurchases, capital expenditures and acquisition-related payments over the last 12 months.

    THIRD QUARTER RESULTS
    Overall Results

Net sales from continuing operations for the third quarter of 2008 were $1.015 billion, a decrease of $192 million, or 15.9% from the third quarter of 2007, primarily due to decreases in our Partnered Brands segment. Net sales were inclusive of a $181 million decrease associated with brands or certain brand activities that have been licensed, closed or exited and have not been presented as part of discontinued operations. The impact of changes in foreign currency exchange rates in our international businesses increased net sales by approximately $25 million, or 2.0%, during the quarter.

Gross profit as a percent of net sales was 49.3% in 2008 compared to 48.5% in the third quarter of 2007, principally reflecting an increased gross profit rate and an increased proportion of sales from our Direct Brands segment which runs at a higher gross profit rate than the company average, partially offset by a decreased gross profit rate in our Partnered Brands segment.

Selling, general & administrative expenses ('SG&A') were $474 million, or 46.7% of net sales in 2008, compared to $502 million, or 41.6% of net sales in the third quarter of 2007, primarily reflecting the following:

-- a $27 million increase associated with retail expansion in our Direct Brands segment;

-- a $13 million increase due to the impact of changes in foreign currency exchange rates in our international operations;

-- a $4 million increase in Direct Brands SG&A;

-- a $1 million year over year increase in expenses associated with our streamlining and brand-exiting activities; and

-- a $73 million decrease in Partnered Brands and corporate SG&A.

Operating income was $16 million (1.6% of net sales) in the third quarter of 2008 compared to operating income of $71 million (5.9% of net sales) in the third quarter of 2007. Adjusted operating income in the third quarter was $62 million (6.1% of adjusted net sales) compared to $114 million (9.5% of adjusted net sales) in 2007. The impact of changes in foreign currency exchange rates in our international businesses was immaterial during the quarter.

Income taxes in the third quarter of 2008 decreased by $10 million to $14 million compared to $24 million in the third quarter of 2007. The income tax expense rate for the third quarter of 2008 was affected by a change in estimated fiscal 2008 pre-tax income and the mix of pre-tax income in various jurisdictions, partially offset by the favorable outcome of uncertain tax positions that have been settled with various tax authorities.

Loss from continuing operations in the third quarter of 2008 was ($9) million, or ($0.10) per share, compared to income from continuing operations in the third quarter of 2007 of $34 million, or $0.33 per share. Adjusted diluted EPS from continuing operations in the third quarter of 2008 were $0.39 compared to adjusted diluted EPS from continuing operations of $0.60 in the third quarter of 2007.

Net loss in the third quarter of 2008 was ($69) million, inclusive of losses related to discontinued operations of ($59) million, compared to net income of $33 million in the third quarter of 2007. Loss per share was ($0.73) in the third quarter of 2008 compared to diluted EPS of $0.33 in the third quarter of 2007.

    Segment Highlights

Direct Brands

Net sales in our Direct Brands segment in the third quarter were $617 million, decreasing $12 million, or 1.8%. Excluding the impact of licensing our fragrance operations in the second quarter of 2008, net sales increased 1.7%.

Net sales for Mexx were $333 million, an 8.9% decrease compared to 2007. Excluding the impact of changes in foreign currency exchange rates, net sales for Mexx were $311 million, a 15.0% decrease compared to last year.

         - We ended the quarter with 133 specialty stores, 99 outlets and 234
           concessions, reflecting the net addition over the last 12 months of
           15 outlet stores and the net closure of 4 specialty stores and 72
           concessions;
         - Average retail square footage in the third quarter was
           approximately 1.450 million square feet, an 8% increase compared to
           2007;
         - Sales per square foot for comparable stores over the latest twelve
           months was $458; and
         - Comparable store sales decreased 13% in the third quarter,
           reflecting decreases in our Mexx Europe and Mexx Canada businesses.

Net sales for Juicy Couture were $144 million, a 6.8% increase compared to 2007, primarily driven by increases in retail and outlet. Excluding the impact of licensing our fragrance operations in the second quarter of 2008, net sales increased 20.0%.

         - We ended the quarter with 56 specialty stores and 29 outlet stores,
           reflecting the net addition over the last 12 months of 23 specialty
           stores and 16 outlet stores;
         - Average retail square footage in the third quarter was
           approximately 287 thousand square feet, a 130% increase compared to
           2007;
         - Sales per square foot for comparable stores over the latest twelve
           months was $1,214; and
         - Comparable store sales increased 5% in the third quarter.

Net sales for Lucky Brand were $111 million, a 2.3% increase compared to 2007, primarily driven by increases in outlet, partially offset by decreases in wholesale apparel. Excluding the impact of licensing our fragrance operations in the second quarter of 2008, net sales increased 9.7%.

         - We ended the quarter with 187 specialty stores and 35 outlet
           stores, reflecting the net addition over the last 12 months of 28
           specialty stores and 25 outlet stores;
         - Average retail square footage in the third quarter was
           approximately 528 thousand square feet, a 38% increase compared to
           2007;
         - Sales per square foot for comparable stores over the latest twelve
           months was $606; and
         - Comparable store sales decreased 4% in the third quarter.

Net sales for Kate Spade were $29 million, a 47.0% increase compared to 2007, primarily driven by increases in retail, outlet and wholesale.

         - We ended the quarter with 41 specialty stores and 25 outlet stores,
           reflecting the net addition over the last 12 months of 18 specialty
           stores and 19 outlet stores;
         - Average retail square footage in the third quarter was
           approximately 124 thousand square feet, a 118% increase compared to
           2007;
         - Sales per square foot for comparable stores over the latest twelve
           months was $729; and
         - Comparable store sales decreased 13% in the third quarter.

Direct Brands segment operating income in the third quarter was $35 million (5.7% of net sales), compared to $87 million (13.8% of net sales) in 2007.