Fifth & Pacific Alters 2012 Outlook

Fifth & Pacific Companies Inc. (FNP - Snapshot Report) has recently lowered its adjusted EBITDA outlook for fiscal 2012 since it has witnessed lower-than-expected performance at one of its strongest brands – Juicy Couture. The company now expects adjusted EBITDA to come in the range of $100–$115 million from the earlier projection of $125–$140 million.

Since the beginning of fiscal 2012, the company has been encountering certain issues related to merchandising and pricing in its Juicy Couture brand, which resulted in a massive fall in the company’s full-price realizations. Further, the trend is expected to continue through the rest of the current fiscal year. During the first six months of fiscal 2012, the brand has generated total sales of $215.1 million, which was far below the prior-year level of $232.5 million.

Further, the company’s shipments were delayed during the third quarter due to some problems pertaining to the closure of its Ohio distribution facility. Earlier, the company had planned to outsource its distribution function from third parties and close down this facility. To counter the situation, Fifth & Pacific planned to continue shipping goods from the facility for the near term.

However, Fifth & Pacific strongly believes that by improving inventory management and the allocation process, it can overcome these challenges. Moreover, the company is planning new merchandising and pricing strategies for the Juicy Couture brand at the store level. These initiatives are anticipated to reduce costs while boosting the company’s top line.

Apart from this, Fifth & Pacific has also announced its preliminary results for the third quarter of fiscal 2012. Per the company, adjusted EBITDA is expected to come in the band of $17–$20 million. Moreover, it’s Kate Spade and Lucky brands will continue to report better-than-expected results.

The company’s Kate Spade and Lucky brands’ direct-to-consumer (including e-commerce net sales) comparable sales are anticipated to increase by 21% and 4%, respectively. However, Juicy Couture’s direct-to-consumer comparable sales are likely to inch down by 1%.

Fifth & Pacific designs and markets a portfolio of retail-based, premium, global lifestyle brands including Juicy Couture, Kate Spade and Lucky Brand. The Company's Juicy Couture brand offers luxurious, casual and fun women's and girl's apparel, accessories and jewelry. The Kate Spade brand offers fashion products like accessories, apparel and jewelry for women and men. Its Lucky brand offers an expanded assortment of men's and women's denim, woven and knit tops, dresses and sweaters, graphic tees, accessories and jewelry.

Fifth & Pacific, which competes with Coach Inc. (COH - Analyst Report), currently has a Zacks #3 Rank, implying a short-term Hold rating. Moreover, the company retains a long-term ‘Neutral’ recommendation.