Liz Claiborne sells fragrance trademarks, cuts distribution costs as it tries to reduce debt

NEW YORK, N.Y. – Liz Claiborne Inc. on Thursday announced plans to cut costs and debt as it tries to shore up its balance sheet.

The struggling New York clothing and fragrance company said it sold trademarks for the Curve fragrance and some smaller brands to Elizabeth Arden for $58.4 million in cash.

The deal, part of a licensing agreement restructuring, also cuts royalty rates for fragrances that remain under license to Liz Claiborne, including the Juicy Couture and Lucky brands, cuts minimum guaranteed royalties and requires a prepayment of other royalties, Liz Claiborne said in a statement.

Liz Claiborne also said it cut fixed distribution costs by signing a deal with Li & Fung Ltd. to distribute goods to Liz Claiborne’s stores and its wholesale business.

Get weekly money news

Get expert insights, Q&A on markets, housing, inflation, and personal finance information delivered to you every Saturday.

Sign up for weekly money newsletter Sign Up

By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy.

The company’s second-quarter loss grew to $89.9 million, or 95 cents per share, from $86.8 million, or 92 cents per share, a year earlier. It has promised to cut debt and reduce sales and administrative costs.

The company said when it released second-quarter earnings in July that it would close its last company-owned distribution centre in the U.S. to save on fixed costs. The move, the company said, would take out $25 million worth of fixed costs. Terms of the agreement with Li & Fung were not released. The deal with Li & Fung will give Liz Claiborne more flexibility without sacrificing service to customers, CEO William McComb said.

McComb said Liz Claiborne will use cash from the deal with Elizabeth Arden to pay down debt. The deal “supports our goal of ending 2011 with lower debt levels than at year end 2010,” he said in the statement.

The company reported just over $548 million in long-term debt at the end of its fiscal second quarter.

Liz Claiborne lost $186.2 million in the first half of this year, and it reported a net loss of $251.5 million last year and $305.7 million in 2009, according to filings with the U.S. Securities and Exchange Commission.

Shares of Liz Claiborne fell 35 cents, or 6.8 per cent, to $4.79 in premarket trading Thursday.