##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended April 4, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from                 to
 Commission file number: 1-10689
 LIZ CLAIBORNE, INC.
  Delaware
    
    13-2842791(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)1441 Broadway, New York, New York
    
    10018(Address of principal executive offices)
    
    (Zip Code)
 (212) 354-4900
  Not Applicable
  þ o
 o o
  Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




---



##### 



LIZ CLAIBORNE, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
April 4, 2009
 PAGENUMBERPART I 
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements:Condensed Consolidated Balance Sheets as of April 4, 2009
(Unaudited), January 3, 2009 and April 5, 2008 (Unaudited)
    
    
    4Condensed Consolidated Statements of Operations for the Three
Month Periods Ended April 4, 2009 (Unaudited) and April 5, 2008
(Unaudited)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Three
Month Periods Ended April 4, 2009 (Unaudited) and April 5, 2008
(Unaudited)
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7  30Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    31  50Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    50  51Item 4.
    
    Controls and Procedures
    
    
    51PART II 
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    51Item 1A.
    
    Risk Factors
    
    
    52  53Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    53Item 5.
    
    Other Information
    
    
    53Item 6.
    
    Exhibits
    
    
    54SIGNATURES
    
    
    55EX-31.A: CERTIFICATIONEX-31.B: CERTIFICATIONEX-32.A: CERTIFICATIONEX-32.B: CERTIFICATION




---



##### Table of Contents



STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our ability to continue to have the liquidity necessary, through cash flows from
operations and availability under our amended and extended credit facility, which may be
adversely impacted by a number of factors, including the level of our operating cash flows,
our ability to maintain established levels of availability under, and to comply with the
financial and other covenants included in our amended and extended credit facility and the
borrowing base requirement in our amended and extended credit facility that limits the
amount of borrowings we may make based on a formula of, among other things, eligible
accounts receivable and inventory;
    
    general economic conditions in the United States, Europe and other parts of the world;
    
    lower levels of consumer confidence, consumer spending and purchases of discretionary
items, including fashion apparel and related products, such as ours;
    
    continued restrictions in the credit and capital markets, which would impair our ability
to access additional sources of liquidity, if needed;
    
    changes in the cost of raw materials, labor, advertising and transportation;
    
    our dependence on a limited number of large U.S. department store customers, and the
risk of consolidations, restructurings, bankruptcies and other ownership changes in the
retail industry and financial difficulties at our larger department store customers;
    
    our ability to successfully implement our long-term strategic plans;
    
    our ability to affect a turnaround of our MEXX Europe business;
    
    our ability to respond to constantly changing consumer demands and tastes and fashion
trends, across multiple product lines, shopping channels and geographies;
    
    our ability to attract and retain talented, highly qualified executives, and maintain
satisfactory relationships with our employees, both union and non-union, including our
ability to successfully negotiate with our unions with respect to
agreements that expire at the end of May 2009;
    
    our ability to adequately establish, defend and protect our trademarks and other
proprietary rights;
    
    our ability to successfully develop or acquire new product lines or enter new markets or
product categories, and risks related to such new lines, markets or categories, including
the risks associated with our sales of Liz & Co. and Concepts by Claiborne outside of
better department stores and risks associated with our Liz Claiborne and Claiborne brands
association with known designers and retailer and consumer acceptance of the resulting
products;
    
    the impact of the highly competitive nature of the markets within which we operate, both
within the United States and abroad;
    
    our reliance on independent foreign manufacturers, including the risk of their failure
to comply with safety standards or our policies regarding labor practices;
    
    risks associated with our agreement with Li & Fung, which results in a single
foreign buying agent for substantially all of our products;
    
    our international operations are subject to a variety of legal, regulatory, political
and economic risks, including risks relating to the importation and exportation of product;
    
    our ability to adapt to and compete effectively in the current quota environment in
which general quota has expired on apparel products but political activity seeking to
re-impose quota has been initiated or threatened; and
    
    our exposure to domestic and foreign currency fluctuations.




---



##### Table of Contents



4 
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 April 4,
    
    
    
    
    
    April 5,2009
    
    
    January 3,
    
    
    2008(Unaudited)
    
    
    2009
    
    
    (Unaudited)AssetsCurrent Assets:Cash and cash equivalents
    
    $
    41,457
    
    
    $
    25,431
    
    
    $
    111,142Accounts receivable  trade, net
    
    
    384,186
    
    
    
    339,158
    
    
    
    566,656Inventories, net
    
    
    436,131
    
    
    
    464,619
    
    
    
    526,052Deferred income taxes
    
    
    8,116
    
    
    
    6,816
    
    
    
    99,506Other current assets
    
    
    119,575
    
    
    
    223,379
    
    
    
    287,500Assets held for sale
    
    
    16,649
    
    
    
    
    
    
    
    31,227Total current assets
    
    
    1,006,114
    
    
    
    1,059,403
    
    
    
    1,622,083Property and Equipment, Net
    
    
    524,796
    
    
    
    572,428
    
    
    
    587,404Goodwill, Net
    
    
    
    
    
    
    
    
    
    
    676,238Intangibles, Net
    
    
    249,244
    
    
    
    251,267
    
    
    
    316,939Deferred Income Taxes
    
    
    2,164
    
    
    
    2,200
    
    
    
    20,417Other Assets
    
    
    32,986
    
    
    
    20,154
    
    
    
    23,236Total Assets
    
    $
    1,815,304
    
    
    $
    1,905,452
    
    
    $
    3,246,317Liabilities and Stockholders EquityCurrent Liabilities:Short-term borrowings
    
    $
    267,966
    
    
    $
    110,219
    
    
    $
    77,087Accounts payable
    
    
    174,660
    
    
    
    211,529
    
    
    
    225,425Accrued expenses
    
    
    260,925
    
    
    
    301,591
    
    
    
    416,730Income taxes payable
    
    
    2,673
    
    
    
    3,890
    
    
    
    34,045Deferred income taxes
    
    
    
    
    
    
    
    
    
    
    497Total current liabilities
    
    
    706,224
    
    
    
    627,229
    
    
    
    753,784Long-Term Debt
    
    
    485,929
    
    
    
    633,420
    
    
    
    912,025Other Non-Current Liabilities
    
    
    165,052
    
    
    
    98,786
    
    
    
    109,885Deferred Income Taxes
    
    
    38,422
    
    
    
    38,358
    
    
    
    1,157Commitments and Contingencies (Note 9)Stockholders Equity:Preferred stock, $.01 par value, authorized shares 
50,000,000, issued shares  none
    
    
    
    
    
    
    
    
    
    
    Common stock, $1 par value, authorized shares 
250,000,000, issued shares  176,437,234
    
    
    176,437
    
    
    
    176,437
    
    
    
    176,437Capital in excess of par value
    
    
    294,845
    
    
    
    292,144
    
    
    
    295,170Retained earnings
    
    
    1,883,687
    
    
    
    1,975,082
    
    
    
    2,911,835Accumulated other comprehensive loss
    
    
    (64,905
    )
    
    
    (66,716
    )
    
    
    (37,822
    )2,290,064
    
    
    
    2,376,947
    
    
    
    3,345,620Common stock in treasury, at cost 81,361,036,
81,316,925 and 81,610,514 shares
    
    
    (1,874,030
    )
    
    
    (1,873,300
    )
    
    
    (1,880,012
    )Total Liz Claiborne, Inc. stockholders equity
    
    
    416,034
    
    
    
    503,647
    
    
    
    1,465,608Noncontrolling interest
    
    
    3,643
    
    
    
    4,012
    
    
    
    3,858Total stockholders equity
    
    
    419,677
    
    
    
    507,659
    
    
    
    1,469,466Total Liabilities and Stockholders Equity
    
    $
    1,815,304
    
    
    $
    1,905,452
    
    
    $
    3,246,317




---



##### Table of Contents



5 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
   Three Months EndedApril 4,
    
    
    April 5,2009
    
    
    2008(13 Weeks)
    
    
    (14 Weeks)Net Sales
    
    $
    779,665
    
    
    $
    1,095,374Cost of goods sold
    
    
    430,842
    
    
    
    568,323Gross Profit
    
    
    348,823
    
    
    
    527,051Selling, general & administrative expenses
    
    
    425,029
    
    
    
    539,458Goodwill impairment
    
    
    1,898
    
    
    
    Operating Loss
    
    
    (78,104
    )
    
    
    (12,407
    )Other income (expense), net
    
    
    5,913
    
    
    
    (2,594
    )Interest expense, net
    
    
    (13,882
    )
    
    
    (12,103
    )Loss Before Provision (Benefit) for Income Taxes
    
    
    (86,073
    )
    
    
    (27,104
    )Provision (benefit) for income taxes
    
    
    1,260
    
    
    
    (19,445
    )Loss from Continuing Operations
    
    
    (87,333
    )
    
    
    (7,659
    )Discontinued operations, net of tax
    
    
    (4,415
    )
    
    
    (23,265
    )Net Loss
    
    
    (91,748
    )
    
    
    (30,924
    )Net (loss) income attributable to the
noncontrolling interest
    
    
    (369
    )
    
    
    97Net Loss Attributable to Liz Claiborne, Inc.
    
    $
    (91,379
    )
    
    $
    (31,021
    )Earnings per Share:Basic and DilutedLoss from Continuing Operations
Attributable to Liz Claiborne, Inc.
    
    $
    (0.93
    )
    
    $
    (0.08
    )Net Loss Attributable to Liz Claiborne, Inc.
    
    $
    (0.97
    )
    
    $
    (0.33
    )Weighted Average Shares, Basic
    
    
    93,771
    
    
    
    93,507Weighted Average Shares, Diluted
    
    
    93,771
    
    
    
    93,507




---



##### Table of Contents



6 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Three Months EndedApril 4,
    
    
    April 5,2009
    
    
    2008(13 Weeks)
    
    
    (14 Weeks)Cash Flows from Operating Activities:Net loss
    
    $
    (91,748
    )
    
    $
    (30,924
    )Adjustments to arrive at loss from continuing operations
    
    
    4,415
    
    
    
    23,265Loss from continuing operations
    
    
    (87,333
    )
    
    
    (7,659
    )Adjustments to reconcile loss from continuing operations to net
cash provided by (used in) operating activities:Depreciation and amortization
    
    
    38,653
    
    
    
    39,499Impairment of goodwill
    
    
    1,898
    
    
    
    Streamlining initiative and other asset write-downs
    
    
    5,865
    
    
    
    2,707Loss on asset disposals, net
    
    
    3,453
    
    
    
    14,152Share-based compensation
    
    
    1,894
    
    
    
    3,391Other, net
    
    
    (57
    )
    
    
    24Changes in assets and liabilities:Increase in accounts receivable  trade, net
    
    
    (45,111
    )
    
    
    (117,060
    )Decrease in inventories, net
    
    
    24,354
    
    
    
    8,791Decrease in
other current and non-current assets
    
    
    10,281
    
    
    
    47,038(Decrease) increase in accounts payable
    
    
    (31,063
    )
    
    
    1,911Increase
(decrease) in accrued expenses and other non-current liabilities
    
    
    28,058
    
    
    
    (49,794
    )Net change in income tax assets and liabilities
    
    
    101,487
    
    
    
    (87,582
    )Net cash used in operating activities of discontinued operations
    
    
    (6,545
    )
    
    
    (9,770
    )Net cash provided by (used in) operating activities
    
    
    45,834
    
    
    
    (154,352
    )Cash Flows from Investing Activities:Purchases of property and equipment
    
    
    (18,659
    )
    
    
    (46,105
    )Payments for purchases of businesses
    
    
    (5,000
    )
    
    
    (5,066
    )Payments for in-store merchandise shops
    
    
    (1,225
    )
    
    
    (1,632
    )Other, net
    
    
    309
    
    
    
    (392
    )Net cash provided by investing activities of discontinued operations
    
    
    
    
    
    
    60,344Net cash (used in) provided by investing activities
    
    
    (24,575
    )
    
    
    7,149Cash Flows from Financing Activities:Short-term borrowings, net
    
    
    27,958
    
    
    
    61,698Principal payments under capital lease obligations
    
    
    (1,066
    )
    
    
    (1,075
    )Dividends paid
    
    
    
    
    
    
    (5,257
    )Excess tax benefits related to stock options
    
    
    
    
    
    
    (2,058
    )Deferred financing fees
    
    
    (26,651
    )
    
    
    (747
    )Net cash provided by financing activities
    
    
    241
    
    
    
    52,561Effect of Exchange Rate Changes on Cash and Cash Equivalents
    
    
    (5,474
    )
    
    
    383Net Change in Cash and Cash Equivalents
    
    
    16,026
    
    
    
    (94,259
    )Cash and Cash Equivalents at Beginning of Period
    
    
    25,431
    
    
    
    205,401Cash and Cash Equivalents at End of Period
    
    $
    41,457
    
    
    $
    111,142




---



##### Table of Contents



7 LIZ CLAIBORNE, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
      
    
    Domestic-Based 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 three domestic, retail-based operating
segments: JUICY COUTURE, KATE SPADE and LUCKY BRAND.
    
    International-Based Direct Brands segment  consists of the specialty retail, outlet,
concession, wholesale apparel, wholesale non-apparel (including accessories, jewelry and
handbags), e-commerce and licensing operations of MEXX, the Companys international,
retail-based operating segment.
    
    Partnered Brands segment  consists of one operating segment including the wholesale
apparel, wholesale non-apparel, specialty retail, outlet, e-commerce and licensing
operations of the Companys wholesale-based brands including: AXCESS, CLAIBORNE
(mens), CONCEPTS BY CLAIBORNE, DANA BUCHMAN, KENSIE, LIZ & CO., LIZ CLAIBORNE, MAC & JAC,
MARVELLA, MONET, TRIFARI, and the Companys licensed DKNY® JEANS, DKNY® ACTIVE and DKNY®
MENS brands.




---



##### Table of Contents



8          NATURE OF OPERATIONS
  PRINCIPLES OF CONSOLIDATION
  USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES




---



##### Table of Contents



9  Revenue Recognition
  Income Taxes
  Accounts Receivable  Trade, Net




---



##### Table of Contents



10  Inventories, Net
   Goodwill and Intangibles, Net




---



##### Table of Contents



11       Accrued Expenses
  Derivative Instruments




---



##### Table of Contents



12    Share-Based Compensation
  OTHER SIGNIFICANT ACCOUNTING POLICIES
 Fair Value of Financial Instruments
   Level 1 -
    
    Quoted market prices in active markets for identical assets or liabilities;Level 2 -
    
    Inputs other than Level 1 inputs that are either directly or indirectly
observable; andLevel 3 -
    
    Unobservable inputs developed using estimates and assumptions developed
by the Company, which reflect those that a market participant would use.
  Level 2In thousands
    
    April 4, 2009
    
    January 3, 2009
    
    April 5, 2008Financial Assets:Derivatives
    
    $
    945
    
    
    $
    2,424
    
    
    $
    457Financial Liabilities:Derivatives
    
    $
    (5,673
    )
    
    $
    (8,835
    )
    
    $
    (9,196
    )




---



##### Table of Contents



13  Total LossesNet Carrying
    
    
    Fair Value Measured and Recorded at
    
    
    for ThreeValue as of
    
    
    Reporting Date Using:
    
    
    Months EndedIn thousands
    
    
    April 4, 2009
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    April 4, 2009Long-lived assets held and used
    
    $
    432
    
    
    $
    
    
    
    $
    
    
    
    $
    432
    
    
    $
    3,090
   Cash and Cash Equivalents
  Property and Equipment, Net




---



##### Table of Contents



14   Operating Leases
  Foreign Currency Translation
  Foreign Currency Transactions
  Cost of Goods Sold
  Advertising, Promotion and Marketing
  Shipping and Handling Costs
  Fiscal Year




---



##### Table of Contents



15 RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
    LIQUIDITY AND OTHER MATTERS
 Liquidity Enhancement and Cost Reduction




---



##### Table of Contents



April 4,
    
    
    April 5,In thousands
    
    2009
    
    
    2008Inventories
    
    $
    
    
    
    $
    8,904Property and equipment
    
    
    16,649
    
    
    
    5,881Intangible assets
    
    
    
    
    
    
    16,442Total assets held for sale
    
    $
    16,649
    
    
    $
    31,227




---



##### Table of Contents



17  Three Months EndedApril 4,
    
    
    April 5,2009
    
    
    2008In thousands
    
    (13 Weeks)
    
    
    (14 Weeks)Net sales
    
    $
    796
    
    
    $
    49,781Loss before benefit for income taxes
    
    $
    (3,021
    )
    
    $
    (18,037
    )Benefit for income taxes
    
    
    
    
    
    
    (6,974
    )Loss from discontinued operations, net of tax
    
    $
    (3,021
    )
    
    $
    (11,063
    )Loss on disposal of discontinued operations,
net of tax
    
    $
    (1,394
    )
    
    $
    (12,202
    )
   Capital in
    
    
    
    
    
    
    Common stockexcess of par
    
    
    Retained
    
    
    in treasury, at
    
    
    NoncontrollingIn thousands
    
    value
    
    
    earnings
    
    
    cost
    
    
    interestBalance as of January 3, 2009
    
    $
    292,144
    
    
    $
    1,975,082
    
    
    $
    (1,873,300
    )
    
    $
    4,012Net loss
    
    
    
    
    
    
    (91,379
    )
    
    
    
    
    
    
    (369
    )Restricted shares issued, net
of cancellations and
shares withheld for taxes
    
    
    825
    
    
    
    
    
    
    
    (756
    )
    
    
    Share-based compensation
    
    
    1,894
    
    
    
    
    
    
    
    
    
    
    
    Dividend equivalent units vested
    
    
    (18
    )
    
    
    (16
    )
    
    
    26
    
    
    
    Balance as of April 4, 2009
    
    $
    294,845
    
    
    $
    1,883,687
    
    
    $
    (1,874,030
    )
    
    $
    3,643
  Three Months EndedApril 4,
    
    
    April 5,2009
    
    
    2008In thousands
    
    (13 Weeks)
    
    
    (14 Weeks)Net loss
    
    $
    (91,748
    )
    
    $
    (30,924
    )Other comprehensive (loss) income, net of tax:Change in cumulative translation adjustment
    
    
    (13,489
    )
    
    
    25,752Change in cumulative translation adjustment on Eurobonds and other
instruments, net of income taxes of $0 and $2,241, respectively
    
    
    12,109
    
    
    
    (36,652
    )Changes in unrealized losses on available-for-sale securities, net
of income taxes of $0 and $31, respectively
    
    
    (77
    )
    
    
    (10
    )Changes in fair value of cash flow hedges, net of income taxes of
$(166) and $522, respectively
    
    
    3,268
    
    
    
    (2,330
    )Comprehensive loss
    
    
    (89,937
    )
    
    
    (44,164
    )Comprehensive loss (income) attributable to the noncontrolling interest
    
    
    369
    
    
    
    (97
    )Comprehensive loss attributable to Liz Claiborne, Inc.
    
    $
    (89,568
    )
    
    $
    (44,261
    )




---



##### Table of Contents



18  April 4,
    
    
    January 3,
    
    
    April 5,In thousands
    
    2009
    
    
    2009
    
    
    2008Cumulative translation adjustment, net of income taxes
of $18,115, $18,115 and $17,169, respectively
    
    $
    (64,402
    )
    
    $
    (63,022
    )
    
    $
    (29,172
    )Unrealized losses on cash flow hedging derivatives, net
of income taxes of $1,152, $1,318 and $2,843,
respectively
    
    
    121
    
    
    
    (3,147
    )
    
    
    (8,532
    )Unrealized losses on available-for-sale securities, net
of income taxes of $0, $0 and $77, respectively
    
    
    (624
    )
    
    
    (547
    )
    
    
    (118
    )Accumulated other comprehensive loss, net of income taxes
    
    $
    (64,905
    )
    
    $
    (66,716
    )
    
    $
    (37,822
    )
   April 4,
    
    
    January 3,
    
    
    April 5,In thousands
    
    2009
    
    
    2009
    
    
    2008Raw materials
    
    $
    22,767
    
    
    $
    25,778
    
    
    $
    29,780Work in process
    
    
    3,413
    
    
    
    2,975
    
    
    
    19,756Finished goods
    
    
    409,951
    
    
    
    435,866
    
    
    
    476,516Total inventories, net
    
    $
    436,131
    
    
    $
    464,619
    
    
    $
    526,052
   April 4,
    
    
    January 3,
    
    
    April 5,In thousands
    
    2009
    
    
    2009
    
    
    2008Land and buildings
    
    $
    69,300
    
    
    $
    108,175
    
    
    $
    108,099Machinery and equipment
    
    
    335,098
    
    
    
    373,094
    
    
    
    382,756Furniture and fixtures
    
    
    268,204
    
    
    
    277,563
    
    
    
    308,395Leasehold improvements
    
    
    542,830
    
    
    
    545,516
    
    
    
    543,6491,215,432
    
    
    
    1,304,348
    
    
    
    1,342,899Less: Accumulated depreciation and
amortization
    
    
    690,636
    
    
    
    731,920
    
    
    
    755,495Total property and equipment, net
    
    $
    524,796
    
    
    $
    572,428
    
    
    $
    587,404




---



##### Table of Contents



19   WeightedAverageAmortization
    
    
    April 4,
    
    
    January 3,
    
    
    April 5,In thousands
    
    Period
    
    
    2009
    
    
    2009
    
    
    2008Amortized intangible assets:Gross Carrying Amount:Licensed trademarks
    
    15 years
    
    $
    32,154
    
    
    $
    32,154
    
    
    $
    32,749Owned trademarks (a)
    
    5 years
    
    
    1,000
    
    
    
    1,000
    
    
    
    9,900Customer relationships (b)
    
    12 years
    
    
    11,928
    
    
    
    11,955
    
    
    
    30,671Merchandising rights
    
    4 years
    
    
    43,714
    
    
    
    49,888
    
    
    
    42,860Other
    
    4 years
    
    
    2,618
    
    
    
    2,618
    
    
    
    3,235Subtotal
    
    8 years
    
    
    91,414
    
    
    
    97,615
    
    
    
    119,415Accumulated Amortization:Licensed trademarks
    
    
    
    
    
    
    (20,501
    )
    
    
    (19,795
    )
    
    
    (17,373
    )Owned trademarks
    
    
    
    
    
    
    (367
    )
    
    
    (316
    )
    
    
    (1,269
    )Customer relationships
    
    
    
    
    
    
    (2,609
    )
    
    
    (2,375
    )
    
    
    (6,432
    )Merchandising rights
    
    
    
    
    
    
    (24,402
    )
    
    
    (30,019
    )
    
    
    (24,181
    )Other
    
    
    
    
    
    
    (1,293
    )
    
    
    (1,183
    )
    
    
    (860
    )Subtotal
    
    
    
    
    
    
    (49,172
    )
    
    
    (53,688
    )
    
    
    (50,115
    )Net:Licensed trademarks
    
    
    
    
    
    
    11,653
    
    
    
    12,359
    
    
    
    15,376Owned trademarks
    
    
    
    
    
    
    633
    
    
    
    684
    
    
    
    8,631Customer relationships
    
    
    
    
    
    
    9,319
    
    
    
    9,580
    
    
    
    24,239Merchandising rights
    
    
    
    
    
    
    19,312
    
    
    
    19,869
    
    
    
    18,679Other
    
    
    
    
    
    
    1,325
    
    
    
    1,435
    
    
    
    2,375Total amortized intangible assets, net
    
    
    
    
    
    
    42,242
    
    
    
    43,927
    
    
    
    69,300Unamortized intangible assets:Owned trademarks(c)
    
    
    
    
    
    
    207,002
    
    
    
    207,340
    
    
    
    247,639Total intangible assets
    
    
    
    
    
    $
    249,244
    
    
    $
    251,267
    
    
    $
    316,939
 
 (a)
    
    The decrease in the balance compared to April 5, 2008 primarily reflects the
disposition of the Companys interest in the Narciso Rodriguez brand.(b)
    
    The change in the balance compared to April 5, 2008 primarily reflects the impact of
dispositions subsequent thereto (see Note 1Basis of Presentation and Significant Accounting
Policies).(c)
    
    The change in the balance compared to April 5, 2008 reflects (i) a non-cash
impairment charge of $10.0 million recorded within the Companys Partnered Brands segment
related to the Villager, Crazy Horse and Russ trademark during the third quarter of 2008 and
(ii) the impact of the disposition of Enyce during 2008.   (In millions)Fiscal Year
    
    Amortization Expense2009
    
    $
    13.92010
    
    
    10.62011
    
    
    8.22012
    
    
    6.12013
    
    
    1.1




---



##### Table of Contents



20   In thousands
    
    Partnered BrandsBalance as of January 3, 2009
    
    $
    Additional purchase price  Mac & Jac
    
    
    1,898Impairment charge
    
    
    (1,898
    )Balance as of April 4, 2009
    
    $
    




---



##### Table of Contents



21 8.
    
    DEBT AND LINES OF CREDIT
  April 4,
    
    
    January 3,
    
    
    April 5,In thousands
    
    2009
    
    
    2009
    
    
    20085% Notes, due July 2013 (a)
    
    $
    468,092
    
    
    $
    485,582
    
    
    $
    548,786Revolving credit facility
    
    
    263,797
    
    
    
    234,400
    
    
    
    340,600Capital lease obligations
    
    
    21,783
    
    
    
    22,787
    
    
    
    25,710Other (b)
    
    
    223
    
    
    
    870
    
    
    
    74,016Total debt
    
    
    753,895
    
    
    
    743,639
    
    
    
    989,112Less: current portion (c)
    
    
    267,966
    
    
    
    110,219
    
    
    
    77,087Long-term debt
    
    $
    485,929
    
    
    $
    633,420
    
    
    $
    912,025
 
 (a)
    
    The change in the balance of these euro-denominated notes reflects the impact of
changes in foreign currency exchange rates.(b)
    
    The decrease in the balance reflects the repayment of outstanding borrowings under
working capital lines of credit.(c)
    
    At April 4, 2009, the balance consists primarily of
outstanding borrowings under the Companys revolving credit
facility and obligations under capital leases. Outstanding revolver
borrowings are reflected as a current liability due to the requirement
to repay such obligations with substantially all cash collected by
the Company, in accordance with an amendment to the Amended Agreement
executed on May 12, 2009. Such requirement does not affect future
borrowing ability or the final maturity date under the Amended
Agreement.




---



##### Table of Contents



22    Borrowing
    
    Outstanding
    
    Letters of
    
    AvailableIn
thousands
    
    Total Facility (a)
    
    Base (a)
    
    Borrowings
    
    Credit Issued
    
    CapacityRevolving credit facility (a)
    
    $
    600,000
    
    
    $
    480,270
    
    
    $
    263,797
    
    
    $
    50,554
    
    
    $
    165,919
 
 (a)
    
    Availability under the Amended Agreement is the lesser of $600 million or a
borrowing base comprised primarily of eligible accounts receivable and inventory.




---



##### Table of Contents



23     2009 Actions
    2008 Actions
  2007 Actions
  
    
    Realignment of its organization to a brand-centric structure;
    
    Discontinuation or licensing of fourteen of the Companys brands;
    
    Implementation of a more competitive cost structure, including cost savings through
staff reductions, closing and consolidation of distribution facilities and office space,
discretionary expense cuts, process re-engineering and supply chain cost rationalization.




---



##### Table of Contents



24   Three Months EndedApril 4, 2009
    
    
    April 5, 2008In
thousands
    
    (13 weeks)
    
    
    (14 Weeks)Domestic-Based Direct Brands
    
    $
    10,580
    
    
    $
    53International-Based Direct Brands
    
    
    3,826
    
    
    
    6,375Partnered Brands
    
    
    18,935
    
    
    
    31,060Total
    
    $
    33,341
    
    
    $
    37,488
  LeasePayroll and
    
    
    Termination
    
    
    Fixed AssetIn
thousands
    
    Related Costs
    
    
    Costs
    
    
    Write-Downs
    
    
    Other Costs
    
    
    TotalBalance at January 3, 2009
    
    $
    11,452
    
    
    $
    15,359
    
    
    $
    
    
    
    $
    616
    
    
    $
    27,4272009 provision
    
    
    16,924
    
    
    
    8,531
    
    
    
    5,210
    
    
    
    2,676
    
    
    
    33,3412009 fixed asset write-downs
    
    
    
    
    
    
    
    
    
    
    (5,210
    )
    
    
    
    
    
    
    (5,210
    )Translation difference
    
    
    (322
    )
    
    
    (151
    )
    
    
    
    
    
    
    9
    
    
    
    (464
    )2009 spending
    
    
    (12,573
    )
    
    
    (5,785
    )
    
    
    
    
    
    
    (2,199
    )
    
    
    (20,557
    )Balance at April 4, 2009
    
    $
    15,481
    
    
    $
    17,954
    
    
    $
    
    
    
    $
    1,102
    
    
    $
    34,537
   Three Months EndedApril 4,
    
    
    April 5,2009
    
    
    2008In
thousands
    
    (13 Weeks)
    
    
    (14 Weeks)Loss from continuing operations
    
    $
    (87,333
    )
    
    $
    (7,659
    )Net (loss)
income attributable to the noncontrolling interest
    
    
    (369
    )
    
    
    97Loss from
continuing operations attributable to Liz Claiborne, Inc.
    
    
    (86,964
    )
    
    
    (7,756
    )Loss from
discontinued operations, net of tax
    
    
    (4,415
    )
    
    
    (23,265
    )Net loss attributable to Liz Claiborne, Inc.
    
    $
    (91,379
    )
    
    $
    (31,021
    )Basic weighted average shares outstanding(a)
    
    
    93,771
    
    
    
    93,507Stock
options and non-vested shares(a)(b)
    
    
    
    
    
    
    Diluted weighted average shares outstanding(a)(b)
    
    
    93,771
    
    
    
    93,507Earnings per share:Basic and dilutedLoss from
continuing operations attributable to Liz Claiborne, Inc.
    
    $
    (0.93
    )
    
    $
    (0.08
    )Loss from discontinued operations attributable to Liz Claiborne, Inc.
    
    $
    (0.04
    )
    
    $
    (0.25
    )Net loss attributable to Liz Claiborne, Inc.
    
    $
    (0.97
    )
    
    $
    (0.33
    )




---



##### Table of Contents



25 
 (a)
    
    Because the Company incurred a loss from continuing operations for the three months
ended April 4, 2009 and April 5, 2008, all outstanding stock options and nonvested shares were
considered antidilutive for such periods. Accordingly, for the three months ended
April 4, 2009 and April 5, 2008, there were 5,912,569 and 4,463,984 outstanding stock options,
respectively and 1,233,724 and 1,200,549 outstanding nonvested shares,
respectively, which were excluded from the computation of diluted loss per share.(b)
    
    Excludes 401,960 and 190,000 nonvested shares for the three
months ended April 4, 2009 and April 5, 2008, respectively for which the performance criteria have not yet been
achieved.       
    
    Domestic-Based 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 three domestic, retail-based operating
segments: JUICY COUTURE, KATE SPADE and LUCKY BRAND.
    
    International-Based Direct Brands segment  consists of the specialty retail,
outlet, concession, wholesale apparel, wholesale non-apparel (including accessories,
jewelry and handbags), e-commerce and licensing operations of MEXX, the Companys
international, retail-based operating segment.
    
    Partnered Brands segment  consists of one operating segment including the
wholesale apparel, wholesale non-apparel, specialty retail, outlet, e-commerce and
licensing operations of the Companys wholesale-based brands including: AXCESS,
CLAIBORNE (mens), CONCEPTS BY CLAIBORNE, DANA BUCHMAN, KENSIE, LIZ & CO., LIZ CLAIBORNE,
MAC & JAC, MARVELLA, MONET, TRIFARI, and the Companys licensed DKNY® JEANS, DKNY® ACTIVE
and DKNY® MENS brands.




---



##### Table of Contents



26 Operating(Loss)Dollars in thousands
    
    Net sales
    
    
    % to total
    
    
    Income
    
    
    % of salesThree Months Ended April 4, 2009 (13 weeks)Domestic-Based Direct Brands
    
    $
    259,536
    
    
    
    33.3
    %
    
    $
    (21,163
    )
    
    
    (8.2
    )%International-Based Direct Brands
    
    
    208,541
    
    
    
    26.7
    %
    
    
    (17,191
    )
    
    
    (8.2
    )%Partnered Brands
    
    
    311,588
    
    
    
    40.0
    %
    
    
    (39,750
    )
    
    
    (12.8
    )%Totals
    
    $
    779,665
    
    
    
    100.0
    %
    
    $
    (78,104
    )
    
    
    (10.0
    )%Three Months Ended April 5, 2008 (14 weeks)Domestic-Based Direct Brands
    
    $
    277,916
    
    
    
    25.4
    %
    
    $
    13,252
    
    
    
    4.8
    %International-Based Direct Brands
    
    
    342,234
    
    
    
    31.2
    %
    
    
    14,122
    
    
    
    4.1
    %Partnered Brands
    
    
    475,224
    
    
    
    43.4
    %
    
    
    (39,781
    )
    
    
    (8.4
    )%Totals
    
    $
    1,095,374
    
    
    
    100.0
    %
    
    $
    (12,407
    )
    
    
    (1.1
    )%
  Operating(Loss)Dollars in thousands
    
    Net sales
    
    
    % to total
    
    
    Income
    
    
    % of salesThree Months Ended April 4, 2009 (13 weeks)Domestic
    
    $
    529,755
    
    
    
    67.9
    %
    
    $
    (50,223
    )
    
    
    (9.5
    )%International
    
    
    249,910
    
    
    
    32.1
    %
    
    
    (27,881
    )
    
    
    (11.2
    )%Totals
    
    $
    779,665
    
    
    
    100.0
    %
    
    $
    (78,104
    )
    
    
    (10.0
    )%Three
Months Ended April 5, 2008 (14 weeks)Domestic
    
    $
    696,478
    
    
    
    63.6
    %
    
    $
    (23,088
    )
    
    
    (3.3
    )%International
    
    
    398,896
    
    
    
    36.4
    %
    
    
    10,681
    
    
    
    2.7
    %Totals
    
    $
    1,095,374
    
    
    
    100.0
    %
    
    $
    (12,407
    )
    
    
    (1.1
    )%




---



##### Table of Contents



27  Foreign Currency Contracts Designated as Hedging Instruments Under SFAS No. 133In
thousands
    
    Asset Derivatives
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Notional
    
    
    
    
    
    Sheet
    
    NotionalPeriod
    
    Location
    
    Amount
    
    Fair Value
    
    Location
    
    Amount
    
    Fair ValueApril 4, 2009
    
    Other current assets
    
    $
    34,669
    
    
    $
    734
    
    
    Accrued expenses
    
    $
    99,293
    
    
    $
    5,673January  3, 2009
    
    Other current assets
    
    
    34,702
    
    
    
    2,313
    
    
    Accrued expenses
    
    
    134,109
    
    
    
    8,789April 5, 2008
    
    Other current assets
    
    
    14,987
    
    
    
    161
    
    
    Accrued expenses
    
    
    93,285
    
    
    
    9,129Foreign Currency Contracts Not Designated as Hedging Instruments Under SFAS No. 133In
thousands
    
    Asset Derivatives
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Notional
    
    
    
    
    
    Sheet
    
    NotionalPeriod
    
    Location
    
    Amount
    
    Fair Value
    
    Location
    
    Amount
    
    Fair ValueApril 4, 2009
    
    Other current assets
    
    $
    10,582
    
    
    $
    211
    
    
    Accrued expenses
    
    $
    
    
    
    $
    January 3, 2009
    
    Other current assets
    
    
    12,758
    
    
    
    111
    
    
    Accrued expenses
    
    
    3,701
    
    
    
    46April 5, 2008
    
    Other current assets
    
    
    14,006
    
    
    
    296
    
    
    Accrued expenses
    
    
    5,340
    
    
    
    67
  In
thousands
    
    Three Months Ended April 4, 2009Location of Gainor (Loss)Amount of Gain or
    
    Reclassified from
    
    Amount of Gain or
    
    Amount of Gain or(Loss) Recognized
    
    Accumulated OCI
    
    (Loss) Reclassified
    
    (Loss) Recognized inin OCI on
    
    into Income
    
    from Accumulated
    
    Income onDerivative
    
    (Effective and
    
    OCI into Income
    
    DerivativeInstrument
    
    (Effective Portion)
    
    Ineffective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Foreign Exchange
Contracts
    
    $
    5,506
    
    
    Cost of goods sold
    
    $
    (2,072
    )
    
    $
    379
 In
thousands
    
    Three Months Ended April 5, 2008Location of Gainor (Loss)Amount of Gain or
    
    Reclassified from
    
    Amount of Gain or
    
    Amount of Gain or(Loss) Recognized
    
    Accumulated OCI
    
    (Loss) Reclassified
    
    (Loss) Recognized inin OCI on
    
    into Income
    
    from Accumulated
    
    Income onDerivative
    
    (Effective and
    
    OCI into Income
    
    DerivativeInstrument
    
    (Effective Portion)
    
    Ineffective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Foreign Exchange
Contracts
    
    $
    (5,948
    )
    
    Cost of goods sold
    
    $
    3,096
    
    
    $
    446




---



##### Table of Contents



28
       Stock Options
  Three Months EndedValuation Assumptions:
    
    April 4, 2009
    
    April 5, 2008Weighted-average fair value of options granted
    
    $
    0.80
    
    
    $
    5.02Expected volatility
    
    48.7% to 60.7%
    
    25.3% to 37.6%Weighted-average volatility
    
    
    50.0
    %
    
    
    25.7
    %Expected term (in years)
    
    
    4.9
    
    
    
    4.5Dividend yield
    
    
    0.0
    %
    
    
    1.24
    %Risk-free rate
    
    0.8% to 4.5%
    
    4.8% to 5.2%Expected annual forfeiture
    
    
    12.7
    %
    
    
    10.0
    %




---



##### Table of Contents



29  Weighted
    
    Weighted Average
    
    AggregateAverage Exercise
    
    Remaining
    
    Intrinsic ValueShares
    
    Price
    
    Contractual Term
    
    ($000)Outstanding at January 3, 2009
    
    
    5,359,319
    
    
    $
    27.15
    
    
    
    4.5
    
    
    $
    819Granted
    
    
    724,000
    
    
    
    1.77Cancelled
    
    
    (170,750
    )
    
    
    29.83Outstanding at April 4, 2009
    
    
    5,912,569
    
    
    $
    23.96
    
    
    
    5.0
    
    
    $
    1,762Vested or expected to vest at April 4, 2009
    
    
    5,292,155
    
    
    $
    25.89
    
    
    
    4.8
    
    
    $
    1,217Exercisable at April 4, 2009
    
    
    3,164,751
    
    
    $
    32.69
    
    
    
    3.9
    
    
    $
    
   Restricted Stock
  WeightedAverage GrantShares
    
    Date Fair ValueNonvested stock at January 3, 2009 (a)(b)
    
    
    2,163,108
    
    
    $
    21.38Granted
    
    
    43,900
    
    
    
    2.47Vested
    
    
    (174,329
    )
    
    
    39.51Cancelled (b)
    
    
    (396,995
    )
    
    
    19.75Nonvested stock at April 4, 2009 (a)(b)
    
    
    1,635,684
    
    
    $
    19.34Expected to vest as of April 4, 2009
    
    
    935,736
    
    
    $
    19.04
 
 (a)
    
    During 2007, performance shares were granted to a group of key executives. These
shares are subject to certain service and performance conditions to be measured as of the
fiscal 2009 year-end. The ultimate amount of shares earned will be determined by the extent of
achievement of the performance criteria set forth in the performance share agreements and will
range from 0  150% of target.(b)
    
    During 2008, performance shares were granted to a group of key executives. These
shares are subject to certain service and performance conditions to be measured as of the
fiscal 2008 year-end and fiscal 2010 year-end. The ultimate amount of shares earned will be
determined by the extent of achievement of the performance criteria set forth in the
performance share agreements and will range from 0  200% of target. The shares which were
contingently issuable based on 2008 performance were deemed not earned and were cancelled.




---



##### Table of Contents



30   (i)
    
    FASB Staff Position FAS 157-4, Determining Whether a Market Is Not Active and a
Transaction Is Not Distressed, which provides guidelines for making fair value
measurements more consistent with the principles presented in SFAS No. 157. FSP FAS 157-4
provides additional authoritative guidance in determining whether a market is active or
inactive, and whether a transaction is distressed and is applicable to all assets and
liabilities (i.e. financial and nonfinancial) and requires enhanced disclosures.(ii)
    
    FASB Staff Position FAS 115-2, FAS 124-2, and EITF 99-20-2, Recognition and
Presentation of Other-Than-Temporary Impairments, which provides additional guidance to
provide greater clarity about the credit and noncredit component of an other-than-temporary
impairment event and to more effectively communicate when an other-than-temporary
impairment event has occurred. This FSP applies to debt and equity securities.(iii)
    
    FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of
Financial Instruments, which amends SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of financial instruments in
interim as well as in annual financial statements.




---



##### Table of Contents



31 
 ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 OVERVIEW
 Business/Segments
  
    
    Domestic-Based 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 our three domestic, retail-based operating segments:
JUICY COUTURE, KATE SPADE and LUCKY BRAND.
    
    International-Based Direct Brands segment  consists of the specialty retail,
outlet, concession, wholesale apparel, wholesale non-apparel (including accessories,
jewelry and handbags), e-commerce and licensing operations of MEXX, our international,
retail-based operating segment.
    
    Partnered Brands segment  consists of one operating segment including the
wholesale apparel, wholesale non-apparel, specialty retail, outlet, e-commerce and
licensing operations of our wholesale-based brands including: AXCESS, CLAIBORNE
(mens), CONCEPTS BY CLAIBORNE, DANA BUCHMAN, KENSIE, LIZ & CO., LIZ CLAIBORNE, MAC & JAC,
MARVELLA, MONET, TRIFARI and our licensed DKNY® JEANS, DKNY® ACTIVE and DKNY® MENS brands.
  
    
    Domestic (wholesale customers, licensing, Company-owned specialty retail and
outlet stores located in the United States and e-commerce sites); and
    
    International (wholesale customers, licensing, Company-owned specialty retail
and outlet stores and concession stores located outside of the United States).




---



##### Table of Contents



32    Market Environment / Global Economic Uncertainty
   Competitive Profile




---



##### Table of Contents



33  Liquidity, Cost Reduction, Supply Chain and Portfolio Rationalization Initiatives




---



##### Table of Contents



34   Overall Results for the Three Months Ended April 4, 2009
 Net Sales
    Gross Profit and Loss from Continuing Operations
  Balance Sheet
  International Operations
  RESULTS OF OPERATIONS




---



##### Table of Contents



35
  THREE MONTHS ENDED APRIL 4, 2009 COMPARED TO THREE MONTHS ENDED APRIL 5, 2008
  Three Months Ended
    
    
    VarianceApril 4, 2009
    
    
    April 5, 2008Dollars in millions
    
    (13 weeks)
    
    
    (14 weeks)
    
    
    $
    
    
    %Net Sales
    
    $
    779.7
    
    
    $
    1,095.4
    
    
    $
    (315.7
    )
    
    
    (28.8
    )%Gross Profit
    
    
    348.8
    
    
    
    527.1
    
    
    
    (178.3
    )
    
    
    (33.8
    )%Selling, general & administrative expenses
    
    
    425.0
    
    
    
    539.5
    
    
    
    (114.5
    )
    
    
    (21.2
    )%Goodwill impairment
    
    
    1.9
    
    
    
    
    
    
    
    1.9
    
    
    
    *Operating Loss
    
    
    (78.1
    )
    
    
    (12.4
    )
    
    
    (65.7
    )
    
    
    *Other income (expense), net
    
    
    5.9
    
    
    
    (2.6
    )
    
    
    8.5
    
    
    
    *Interest expense, net
    
    
    (13.8
    )
    
    
    (12.1
    )
    
    
    (1.7
    )
    
    
    (14.0
    )%Provision (benefit) for income taxes
    
    
    1.3
    
    
    
    (19.5
    )
    
    
    20.8
    
    
    
    *Loss from Continuing Operations
    
    
    (87.3
    )
    
    
    (7.6
    )
    
    
    (79.7
    )
    
    
    *Discontinued operations, net of tax
    
    
    (4.4
    )
    
    
    (23.3
    )
    
    
    18.9
    
    
    
    *Net Loss
    
    
    (91.7
    )
    
    
    (30.9
    )
    
    
    (60.8
    )
    
    
    *Net (loss) income attributable to the
noncontrolling interest
    
    
    (0.4
    )
    
    
    0.1
    
    
    
    (0.5
    )
    
    
    *Net Loss Attributable to Liz Claiborne,
Inc.
    
    $
    (91.3
    )
    
    $
    (31.0
    )
    
    $
    (60.3
    )
    
    
    *
 
 *
    
    Not meaningful. Net Sales
 th




---



##### Table of Contents



36  
    
    Domestic-Based Direct Brands net sales were $259.5 million, decreasing
$18.4 million, or 6.6%. Excluding the impact of licensing our fragrance operations in the second quarter of 2008, net sales decreased by 0.8% reflecting the following:
 
    
    Net sales for JUICY COUTURE were $132.6 million, a
5.4% decrease compared to 2008, or an increase of 6.0%
excluding the impact of licensing our fragrance
operations.
 
    
    We ended the quarter with 63 specialty stores and
33 outlet stores, reflecting the net addition over the
last 12 months of 23 specialty stores and 15 outlet
stores;
    
    Average retail square footage in the first quarter
was approximately 320 thousand square feet, an 89.3%
increase compared to 2008;
    
    Sales productivity was $170 per average square foot
as compared to $263 for the first quarter of fiscal
2008; and
    
    Comparable store net sales in our Company-owned
stores decreased by 22.1% in the first quarter of 2009.
 
    
    Net sales for LUCKY BRAND were $97.0 million, an 11.9%
decrease compared to 2008, reflecting decreases in
wholesale apparel and specialty retail, partially
offset by increases in outlet operations.
 
    
    We ended the quarter with 193 specialty stores and
38 outlet stores, reflecting the net addition over the
last 12 months of 20 specialty stores and 18 outlet
stores;
    
    Average retail square footage in the first quarter
was approximately 569 thousand square feet, a 23.4%
increase compared to 2008;
    
    Sales productivity was $95 per average square foot
as compared to $133 for the first quarter of fiscal
2008; and
    
    Comparable store net sales in our Company-owned
stores decreased by 17.8% in the first quarter of 2009.
 
    
    Net sales for KATE SPADE were $29.9 million, an 8.5%
increase compared to 2008, primarily driven by
increases in our wholesale and outlet operations partially offset by declines in specialty retail.
 
    
    We ended the quarter with 47 specialty stores and
28 outlet stores, reflecting the net addition over the
last 12 months of 21 specialty stores and 12 outlet
stores;
    
    Average retail square footage in the first quarter
was approximately 154 thousand square feet, a 77.0%
increase compared to 2008;
    
    Sales productivity was $90 per average square foot
as compared to $155 for the first quarter of fiscal
2008; and
    
    Comparable store net sales in our Company-owned
stores decreased by 27.0% in the first quarter of 2009.
 
    
    International-Based Direct Brands, comprised of our MEXX retail-based lifestyle brand, net
sales were $208.6 million, a decrease of $133.6 million or 39.0% compared to 2008. Excluding
the impact of fluctuations in foreign currency exchange rates, net sales were $241.9
million, a 29.3% decrease as compared to 2008, primarily due to decreases in our MEXX Europe
and MEXX Canada wholesale and retail operations, reflecting the following:
 
    
    We ended the quarter with 136 specialty stores, 99 outlet stores and 233
concessions, reflecting the net addition over the last 12 months of 4
specialty stores and 12 outlet stores and the net closure of 59 concessions;
    
    Average retail square footage in the first quarter was approximately 1.464
million square feet, a 5.6% increase compared to 2008;
    
    Sales productivity was $64 per average square foot as compared to $91 for
the first quarter of fiscal 2008;
    
    Comparable store net sales in our Company-owned stores decreased by 7.0% in the first quarter of 2009; and
    
    Fluctuations in foreign currency exchange rates in our European and Canadian
businesses decreased net sales by $33.3 million.
  
    
    New stores become comparable after 14 full fiscal months of operations
(on the 1st day of the 15th full fiscal month);
    
    Except in unusual circumstances, closing stores become non-comparable
one full fiscal month prior to the scheduled closing date;
    
    A remodeled store will be changed to non-comparable when there is a
20% or more increase/decrease in its selling square footage (effective
at the start of the fiscal month when construction begins). The store
becomes comparable again after 14 full fiscal months from the re-open
date;




---



##### Table of Contents



37 
 
    
    A store that relocates becomes non-comparable when the new location is
materially different from the original location (in respect to selling
square footage and/or traffic patterns); and
    
    Stores that are acquired are not comparable until they have been
reflected in our results for a period of 12 months.
  
    
    Partnered Brands net sales were $311.6 million, a decrease of $163.6 million or 34.4%, reflecting:
 
    
    A $71.6 million, or 15.1%, decrease due to the
divestiture, licensing or exiting of the
following brands: SIGRID OLSEN (closed as of the
second quarter of 2008), Cosmetics group of
brands (due to the exiting of certain brands and
the license of the remaining brands to Elizabeth
Arden effective June 10, 2008), Villager (closed
in the third quarter of 2008), former Ellen
Tracy brand (sold on April 10, 2008) and DANA
BUCHMAN (licensed on an exclusive basis to
Kohls in January 2008) with operations closed
in the second quarter of 2008;
    
    A net $84.8 million, or 17.8%, decrease in sales
of our ongoing Partnered Brands business as the
operating environment continued to adversely
affect our LIZ CLAIBORNE, CLAIBORNE, AXCESS and MONET brands; and
    
    The impact of fluctuations in foreign currency
exchange rates, which decreased net sales by
$7.2 million, or 1.5%, primarily related to our
LIZ CLAIBORNE operations in Europe and Canada.
 Domestic International
 Gross Profit
  Selling, General & Administrative Expenses
  
    
    A $42.7 million decrease in Partnered Brands and corporate SG&A, inclusive of an $8.9
million decrease resulting from the licensing of our cosmetics brands;
    
    A $29.5 million decrease in the operations of our International-Based Direct Brands segment;
    
    A $26.4 million decrease due to the impact of fluctuations in foreign currency exchange
rates in our international operations;
    
    A $25.2 million decrease in expenses associated with our streamlining initiatives and
brand-exiting activities;
    
    A $6.4 million decrease in Domestic-Based Direct Brands, primarily due to the licensing of
our cosmetic brands; and
    
    A $15.7 million year-over-year increase in our Domestic-Based Direct Brands segment
primarily resulting from retail expansion in the second quarter of 2008.
  Goodwill Impairment




---



##### Table of Contents



38 Operating Loss
  
    
    Domestic-Based Direct Brands operating loss was $21.2 million ((8.2)%
of net sales), compared to operating income of $13.3 million (4.8% of
net sales) in 2008. The decrease reflects reduced earnings in our
JUICY COUTURE wholesale and retail operations, KATE SPADE non-apparel
and retail operations and LUCKY BRAND wholesale and retail operations,
as well as restructuring charges principally associated with our LUCKY KIDS
stores.
    
    International-Based Direct Brands operating loss was $17.2 million
((8.2)% of net sales), compared to operating income of $14.1 million
(4.1% of net sales) in 2008. The decrease reflects reduced sales and
an increase in promotional activities, partially offset by a $2.9
million increase resulting from fluctuations in foreign currency
exchange rates.
    
    Partnered Brands operating loss in the first quarter was $39.7 million
((12.8)% of net sales), compared to an operating loss of $39.8 million
((8.4)% of net sales) in 2008, as a result of lower sales and reduced
gross profit partially offset by reduced restructuring expenses.
 Domestic International
 Other Income (Expense), Net
  Interest Expense, Net
  Provision (Benefit) for Income Taxes
  Loss from Continuing Operations
  Discontinued Operations, Net of Tax




---



##### Table of Contents



39 Net Loss Attributable to Liz Claiborne Inc.
  FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
 Cash Requirements
 Sources of Cash.




---



##### Table of Contents



40   Cash and Debt Balances.
 Accounts Receivable
 Inventories
 Borrowings
 Net cash provided by (used in) operating activities




---



##### Table of Contents



41 Net cash used in investing activities
 Net cash provided by financing activities
 Commitments and Capital Expenditures
   
    
    On January 26, 2006, we acquired 100 percent of the equity of Westcoast Contempo
Fashions Limited and Mac & Jac Holdings Limited, which collectively design, market and sell
the Mac & Jac, Kensie and Kensiegirl apparel lines (Mac & Jac), a privately held fashion
apparel company. The purchase price totaled 26.2 million Canadian dollars (or $22.7
million), which included the retirement of debt at closing and fees, but excluded
contingent payments to be determined based upon a multiple of Mac & Jacs earnings in
fiscal years 2006, 2008, 2009 and 2010. Based on the 2008 fiscal year earnings, we have
recorded a liability of $2.6 million as of April 4, 2009. We currently estimate that the
aggregate of the contingent payments will be in the range of approximately $5-15 million,
which will be accounted for as additional purchase price when paid.
    
    On June 8, 1999, we acquired 85.0 percent of the equity of Lucky Brand Dungarees, Inc.
(Lucky Brand), whose core business consists of the Lucky Brand Dungarees line of women
and mens denim-based sportswear. The total purchase price consisted of a cash payment made
at the closing date of approximately $85.0 million and a payment made in April 2003 of
$28.5 million. An additional payment of $12.7 million was made in 2000 for tax-related
purchase price adjustments. On January 16, 2009, January 16, 2008, January 16, 2007,
January 17, 2006 and January 28, 2005, we paid $5.0 million, $5.0 million, $10.0 million,
$10.0 million and $35.0 million, respectively, for 0.4%, 0.4%, 1.5%, 1.9% and 8.25%,
respectively, of the remaining equity of Lucky Brand. We will acquire 0.4% of the equity of
Lucky Brand in January of 2010 for a payment of $5.0 million. We recorded the present value
of fixed amounts owed of $4.8 million in Accrued expenses and Other Non-Current
Liabilities. The remaining 2.28% of the original shares outstanding will be settled for an
aggregate purchase price composed of the following two installments: (i) a payment made in 2008 of
$15.7 million that was based on a multiple of Lucky Brands 2007
earnings and (ii) a 2011 payment that will be based
on a multiple of Lucky Brands 2010 earnings, net of the 2008 payment, which we estimate
will be in the range of approximately $5-9 million.




---



##### Table of Contents



42  Financing Arrangements
  In thousands
    
    April 4, 2009
    
    
    January 3, 2009
    
    
    April 5, 20085% Notes (a)
    
    $
    468,092
    
    
    $
    485,582
    
    
    $
    548,786Revolving credit facility
    
    
    263,797
    
    
    
    234,400
    
    
    
    340,600Capital lease obligations
    
    
    21,783
    
    
    
    22,787
    
    
    
    25,710Other (b)
    
    
    223
    
    
    
    870
    
    
    
    74,016Total debt
    
    $
    753,895
    
    
    $
    743,639
    
    
    $
    989,112
 
 (a)
    
    The change in the balance of these euro-denominated notes reflects
the impact of changes in foreign currency exchange rates.(b)
    
    The decrease in the balance reflects the repayment of outstanding borrowings under
working capital lines of credit.




---



##### Table of Contents



43  Borrowing
    
    Outstanding
    
    Letters of
    
    AvailableIn thousands
    
    Total Facility (a)
    
    Base (a)
    
    Borrowings
    
    Credit Issued
    
    CapacityRevolving credit facility (a)
    
    $
    600,000
    
    
    $
    480,270
    
    
    $
    263,797
    
    
    $
    50,554
    
    
    $
    165,919
 
 (a)
    
    Availability under the Amended Agreement is the lesser of $600
million or a borrowing base comprised primarily of eligible accounts receivable and inventory. Off-Balance Sheet Arrangements
   Hedging Activities




---



##### Table of Contents



Foreign Currency Contracts Designated as Hedging Instruments Under SFAS No. 133In thousands
    
    Asset Derivatives
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Notional
    
    
    
    
    
    Sheet
    
    NotionalPeriod
    
    Location
    
    Amount
    
    Fair Value
    
    Location
    
    Amount
    
    Fair ValueApril 4, 2009
    
    Other current assets
    
    $
    34,669
    
    
    $
    734
    
    
    Accrued expenses
    
    $
    99,293
    
    
    $
    5,673January 3, 2009
    
    Other current assets
    
    
    34,702
    
    
    
    2,313
    
    
    Accrued expenses
    
    
    134,109
    
    
    
    8,789April 5, 2008
    
    Other current assets
    
    
    14,987
    
    
    
    161
    
    
    Accrued expenses
    
    
    93,285
    
    
    
    9,129Foreign Currency Contracts Not Designated as Hedging Instruments Under SFAS No. 133In thousands
    
    Asset Derivatives
    
    Liability DerivativesBalance
    
    
    
    
    
    
    
    
    
    BalanceSheet
    
    Notional
    
    
    
    
    
    Sheet
    
    NotionalPeriod
    
    Location
    
    Amount
    
    Fair Value
    
    Location
    
    Amount
    
    Fair ValueApril 4, 2009
    
    Other current assets
    
    $
    10,582
    
    
    $
    211
    
    
    Accrued expenses
    
    $
    
    
    
    $
    January 3, 2009
    
    Other current assets
    
    
    12,758
    
    
    
    111
    
    
    Accrued expenses
    
    
    3,701
    
    
    
    46April 5, 2008
    
    Other current assets
    
    
    14,006
    
    
    
    296
    
    
    Accrued expenses
    
    
    5,340
    
    
    
    67
  In thousands
    
    Three Months Ended April 4, 2009Location of Gainor (Loss)Amount of Gain or
    
    Reclassified from
    
    Amount of Gain or
    
    Amount of Gain or(Loss) Recognized
    
    Accumulated OCI
    
    (Loss) Reclassified
    
    (Loss) Recognized inin OCI on
    
    into Income
    
    from Accumulated
    
    Income onDerivative
    
    (Effective and
    
    OCI into Income
    
    DerivativeInstrument
    
    (Effective Portion)
    
    Ineffective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Foreign Exchange
Contracts
    
    $
    5,506
    
    
    Cost of goods sold
    
    $
    (2,072
    )
    
    $
    379In thousands
    
    Three Months Ended April 5, 2008Location of Gainor (Loss)Amount of Gain or
    
    Reclassified from
    
    Amount of Gain or
    
    Amount of Gain or(Loss) Recognized
    
    Accumulated OCI
    
    (Loss) Reclassified
    
    (Loss) Recognized inin OCI on
    
    into Income
    
    from Accumulated
    
    Income onDerivative
    
    (Effective and
    
    OCI into Income
    
    DerivativeInstrument
    
    (Effective Portion)
    
    Ineffective Portion)
    
    (Effective Portion)
    
    (Ineffective Portion)Foreign Exchange
Contracts
    
    $
    (5,948
    )
    
    Cost of goods sold
    
    $
    3,096
    
    
    $
    446




---



##### Table of Contents



45   USE OF ESTIMATES AND CRITICAL ACCOUNTING POLICIES




---



##### Table of Contents



46 Revenue Recognition
  Income Taxes
  Accounts Receivable  Trade, Net
  Inventories, Net




---



##### Table of Contents



47  Goodwill and Intangibles, Net




---



##### Table of Contents



48    Accrued Expenses
  Derivative Instruments




---



##### Table of Contents



49  Share-Based Compensation
  RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
    RECENT ACCOUNTING PRONOUNCEMENTS
  (i)
    
    FASB Staff Position FAS 157-4, Determining Whether a Market Is Not Active and a
Transaction Is Not Distressed, which provides guidelines for making fair value
measurements more consistent with the principles presented in SFAS No. 157. FSP FAS 157-4
provides additional authoritative guidance in determining whether a market is active or
inactive, and whether a transaction is distressed and is applicable to all assets and
liabilities (i.e. financial and nonfinancial) and requires enhanced disclosures.




---



##### Table of Contents



50 (ii)
    
    FASB Staff Position FAS 115-2, FAS 124-2, and EITF 99-20-2, Recognition and
Presentation of Other-Than-Temporary Impairments, which provides additional guidance to
provide greater clarity about the credit and noncredit component of an other-than-temporary
impairment event and to more effectively communicate when an other-than-temporary
impairment event has occurred. This FSP applies to debt and equity securities.(iii)
    
    FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of
Financial Instruments, which amends SFAS No. 107, Disclosures about Fair Value of
Financial Instruments, to require disclosures about fair value of financial instruments in
interim as well as in annual financial statements.
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   In millions
    
    April 4, 2009
    
    January 3, 2009
    
    April 5, 2008Variable rate debt
    
    
    $263.8
    
    
    
    $234.4
    
    
    
    $413.7Average interest rate
    
    
    6.21%
    
    
    
    3.90%
    
    
    
    4.31%




---



##### Table of Contents



51   
 ITEM 4. CONTROLS AND PROCEDURES
   
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Angela Tyler (individually and on behalf of all others
similarly situated) v. Liz Claiborne, Inc, Trudy F. Sullivan and William L. McComb




---



##### Table of Contents



52 
 ITEM 1A. RISK FACTORS
   Our ability to continue to have the liquidity necessary, through cash flows from operations and
availability under our amended and extended credit facility, may be adversely impacted by a number
of factors, including the level of our operating cash flows, our ability to comply with the
financial and other covenants included in our amended and extended credit facility, and the
borrowing base requirement in our amended and extended credit facility that limits the amount of
borrowings we may make based on a formula of, among other things, eligible accounts receivable and
inventory.




---



##### Table of Contents



53  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  MaximumApproximateDollar Value ofTotal Number of
    
    
    Shares that MayTotal Number
    
    
    
    
    
    
    Shares Purchased as
    
    
    Yet Be Purchasedof Shares
    
    
    
    
    
    
    Part of Publicly
    
    
    Under the Plans orPurchased
    
    
    Average Price
    
    
    Announced Plans or
    
    
    ProgramsPeriod
    
    (in thousands)
    
    
    Paid Per Share
    
    
    Programs
    
    
    (in thousands) (b)January 4, 2009 - January 31, 2009
    
    
    1.8
    (a)
    
    $
    2.63
    
    
    
    
    
    
    $
    28,749February 1, 2009 - March 7, 2009
    
    
    63.5
    (a)
    
    
    2.73
    
    
    
    
    
    
    
    28,749March 8, 2009 - April 4, 2009
    
    
    0.8
    (a)
    
    
    2.08
    
    
    
    
    
    
    
    28,749Total 13 - Weeks Ended April 4, 2009
    
    
    66.1
    (a)
    
    $
    2.71
    
    
    
    
    
    
    $
    28,749
 
 (a)
    
    Includes shares withheld to cover tax-withholding
requirements relating to the vesting of restricted stock
issued to employees pursuant to the Companys
shareholder-approved stock incentive plans.(b)
    
    The Company initially announced the authorization of a
share buyback program in December 1989. Since its
inception, the Companys Board of Directors has authorized
the purchase under the program of an aggregate of $2.275
billion of the Companys stock. 
 ITEM 5. OTHER INFORMATION




---



##### Table of Contents



54 
 ITEM 6. EXHIBITS
 31(a)
    
    Certification of Chief Executive Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.31(b)
    
    Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.32(a)*
    
    Certification of Chief Executive Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32(b)*
    
    Certification of Chief Financial Officer Pursuant to Section 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    A signed original of the written statement required by Section 906 has
been provided to the Company and will be retained by the Company and
forwarded to the S.E.C. or its staff upon request.




---



##### Table of Contents



55 
 SIGNATURES
   LIZ CLAIBORNE, INC.
    
    LIZ CLAIBORNE, INC.By:
    
    /s/ Andrew Warren
ANDREW WARREN
    
    By:
    
    /s/ Elaine H. Goodell

ELAINE H. GOODELLChief Financial Officer
    
    
    
    Vice President  Corporate Controller and(Principal financial officer)
    
    
    
    Chief Accounting Officer
(Principal accounting officer)