liz claiborne ar_2003


Published on

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

liz claiborne ar_2003

  1. 1. Liz Claiborne Inc. Competitive Advantage Our multi-brand, multi-channel, multi-geography portfolio helps to protect shareholder value by giving us the flexibility to address trends in distribution and changes in consumer behavior. © 2004 Liz Claiborne Inc. Liz Claiborne Inc. Liz Claiborne Inc. 1441 Broadway, New York, NY 10018
  2. 2. Senior Management 2003 LIZ CLAIBORNE INC. AND SUBSIDIARIES Theo v.d. Aardweg Alexander Groutars Elizabeth Munoz C O R P O R AT E S E C R E TA RY Diane Abbate-Fox Kelly Gvildys Marianne Naberhaus-Smith Nicholas Rubino Liz Claiborne Inc. designs and markets an extensive range of fashion apparel and accessories appropriate to Lynn Ambrose Cami Hayduk Elaine Nedder Jeffrey Ansell Amy Hennisch Keelan Maria Odee wearing occasions ranging from casual to dressy. Although they offer a wide array of styles, all Liz Claiborne Inc. I N V E S T O R R E L AT I O N S Piet Arends Marc Hershkin Sigrid Olsen brands share the common characteristics of innovative fashion and exceptionally high quality and value. Products Robert J.Vill Suveer Arora William Higley Gail Onorato are manufactured to the Company’s specifications in the United States and abroad and are marketed through C O N S O L I D AT E D F I N A N C I A L H I G H L I G H T S Jodie Austin Kimberly Hill Lori O’Rourke REGISTRAR & TRANSFER AGENT leading department and specialty stores and other channels in the United States, Canada, Europe, Asia, Australia Stanley Austin David Hirschler Amy O’Shea The Bank of New York and Central and South America. Kirkor Balci Suzanne Hochman Richard Ostell Shareholder Relations Department David Baron Rene Holguin Hans Ouwendijk P.O. Box 11258 (All dollar amounts in thousands Dina Battipaglia Louise Howson Pericles Papayannis Church Street Station except per common share data) 2003 2002 2001 2000 1999 Aaron Battista Steven Hurwitz Kenneth Pratt New York, NY 10286 Wendy Berloe-Buch Leonard Jacaruso Anurup Pruthi 1-866-828-8170 $ 4,241,115 $ 3,717, 503 $ 3,448,522 $ 3,104,141 $ 2,806,548 NET SALES Kent Bisgaard Mary Lisa Jacobson Jane Randel 1,889, 791 1,619,635 1,427,250 1,233,872 1,097,582 GROSS PROFIT Laura Bjurstrom Jason Johnson Tom Reeve INDEPENDENT AUDITORS 279,693** 231,165** 192,057** 184,595** 192,442 NET INCOME Rebecca L. Blair Michael Jones Mary Julia Ripperger Deloitte & Touche LLP Kevin Bollbach Anna Jorgensen Tony Ronayne 2 World Financial Center 821,759 618,490 638,281 535,811 483,967 WORKING CAPITAL Daryl Brown Ingo Jost Rosana Rosales Thedford New York, New York 10281 2,606,999 2,268,357 1,951,255 1,512,159 1,411,801 TOTAL ASSETS Lori Buchbinder Emily Kam Howard Rosenberger FORM 10-K Dana Buchman Daniel Kaminsky Gary Ross 1,577,971 1,286,361 1,056,161 834,285 902,169 STOCKHOLDERS’ EQUITY Ann Bukawyn Francis Kelly Nicholas Rubino A copy of the Company’s Annual PER COMMON SHARE DATA*: Matthew Burris Lori Keurian Robert Rumsby Report on Form 10-K, as filed with Basic earnings 2.60** 2.19** 1.85** 1.73** 1.56 Leo Cantagalli Adelle Kirk Micheline Savarin the Securities and Exchange Commission, is available to stock- Robert Cardascia Steffie Kirschner Boudewijn Schipper Diluted earnings 2.55** 2.16** 1.83** 1.72** 1.56 holders without charge upon written Benedetta Casamento Josephina Ko Margaret Schneider Maclay Book value at year end 14.40 12.02 10.04 8.15 7.95 request to Liz Claiborne Inc., Anne Cashill John Kovac Alphons Schouten Investor Relations Department, One Dividends paid .23 .23 .23 .23 .23 Kevin Castanheiro Yogi Laijawalla Andrea Scoli Claiborne Avenue, North Bergen, Chris Chan Jacqueline Laipply Cyndi Scorsone 107,451,157 105,592,062 103,993,824 106,813,198 123,046,930 BASIC SHARES OUTSTANDING* New Jersey 07047, or by visiting Janie Chang Barry Landau Sharyn Segal-Lepkofker 109,619,241 107,195,872 105,051,035 107,494,886 123,439,182 DILUTED SHARES OUTSTANDING* Kristin Clifford Betty Lee Martin Seitz Christine Conforte Kwila Lee Elizabeth Selleck Hall ANNUAL MEETING 1999 2,807 NET SALES Gail Lynn Conner John Legg Amy Shecter The Annual Meeting of Stockholders Robert Conrad Ronnie Lemmens Tony Shellman (in millions of $) 3,104 2000 will be held at 10:00 a.m., local Anne Cosini D. Bradley Lenz Glenn Shepard time, on Thursday, May 20, 2004 3,449 2001 Steven Crombe Mark Lepine Kathryn Shipman at the offices of Liz Claiborne Inc., Simon Dallimore Dorian Lightbown Shawna Smith 3,718 2002 One Claiborne Avenue, Prakash Damodar Barbara Lipton Thomas Speight North Bergen, New Jersey. 4,241 2003 Cheryl Dapolito Diane Long Olivia Spence Printed on recycled Lois Davis Gina Lo Presti Ashod Spendjian paper. Please recycle this John DeFalco Melanie Lyons David Stiffman document and help to 1999 300 O P E R AT I N G I N C O M E Sara Dennis Kymberly Maas-Lahr Joni Storgion-Knight preserve our environment. (in millions of $) Katherine Devereux Joelle Maher Janice Sullivan 304 2000 Design: Pentagram Denise DiNoia Anliza Mak Tammy Tam 332 2001 Patricia Dipette Gerard Malmont Robert Vill 390 2002 John Doherty Marie Mamone Erich Walker Mark Donatiello Rozann Marsi Dionne Walsh 471 2003 Robin Droescher Debbie Martin Julie Ward-Abdo Laura Dubin-Wander Rosemary Martinek Nina Weigner Steven Duva Joseph Martorana Chaka Wilson DILUTED EARNINGS PER SHARE* 1999 1.56 Brian Dwan Annette Mathieu Craig Wright 2000 1.72 Christine Emmons Jan Matthey Lorenza Wong Paul Engelsman Beth Mayer Nancy Yao 2001 1.83 Rolando Felix Laura Mays-Scuderi Carol Zacher 2002 2.16 Barbara Fevelo Hoad Henry McGuire Doreen Zaldivar-Burns Donald Fleming Robert McKean Barry Zelman 2.55 2003 Pam Flynn Kathryn McKee Weist Adam Zuckerman Scott Formby Donna McKenzie Paula Zusi Sandra Francisco Andrew McLean ASSET INVESTMENT*** 1999 404 Nancy Fritze Andrew Megibow (cumulative, in millions of $) 493 2000 Gail Garramone Ellen Meiner Raffaele Angelo Rosario Germano Trent Merrill 599 2001 Joseph Giudice Enrico Migliaccio 688 2002 Shaun Glazier Carol Miller Edward Goepp Jacques Mitterand 795 2003 Helene Goldberg Cathy Morales * Adjusted for a two-for-one stock split in the form of a 100% stock dividend paid on January 16, 2002 to shareholders of record as of December 31, 2001. Victoria Goldshtein-Graham John Moroz ** Includes the after tax effects of a restructuring gain of $429 ($672 pretax) or $.004 per common share in 2003, a restructuring charge of $4,547 ($7,130 pretax) or $.04 per common share in 2002, a restructuring Lynda Greenblatt Nigel Moss charge of $9,632 ($15,050 pretax) or $.09 per common share in 2001, and restructuring charges of $13,466 ($21,041 pretax) or $.13 per common share and a special investment gain of $5,606 ($8,760 pretax) or $.05 per common share in 2000. *** Includes capital expenditures and in-store merchandise shops. Claiborne
  3. 3. The Brands of Liz Claiborne Inc. Axcess Bora Bora ® Candie’s ® City DKNY Claiborne Crazy Horse Curve Curve Crush Dana Buchman ® DKNY Active ® DKNY Jeans Elisabeth Ellen Tracy Emma James Enyce First Issue Intuitions Jane Street J.H. Collectibles Juicy Couture Kenneth Cole New York Lady Enyce Laundry by Shelli Segal Liz Claiborne Lucky Brand Mambo Marvella Mexx Monet Monet 2 Reaction Kenneth Cole Realities Sigrid Olsen Spark Trifari Villager
  4. 4. Enyce
  5. 5. Multi - Brand Our brand portfolio reflects the dynamic world in which we live with products ranging from classic to trendy, career to casual and urban to suburban at popular to premium price points. Liz Claiborne Accessories
  6. 6. Multi - Channel Our products are sold in virtually every retail format, including upscale and mainstream department stores, specialty stores, promotional chains, e-commerce websites, outlet stores and mass merchandisers. Ensuring that consumers can find our products wherever they choose to shop is central to maintaining competitive advantage.
  7. 7. Mexx Retail Store
  8. 8. Multi- Geography International expansion represents a key area of opportunity for the Company, particularly in Europe, where many of our brands have relevance. We are in a unique position to tap their sales potential by capitalizing on Mexx’s understanding of the similarities and differences among consumers in European countries.
  9. 9. < Paul R. Charron < Adu Advaney Liz Claiborne Inc. Executive Council 2004 Angela Ahrendts > Edward Bucciarelli > Rattan Chadha > < Gail Cook < Jorge Figueredo < Karen Greenberg Roberta Karp > Lawrence McClure > Helen McCluskey > < Karen Murray < Robert Negron < Michael Scarpa Albert Shapiro > Frank Sowinski > John Sullivan > < Trudy Sullivan < Fritz Winans < Robert Zane
  10. 10. Collaborative Culture The study of best practices and the sharing of lessons learned are vital to the success of the organization. They enable us to efficiently manage the increased complexity that comes with a diverse portfolio of businesses.
  11. 11. PA U L R . C H A R R O N Chairman of the Board and Chief Executive Officer
  12. 12. D E A R S T O C K H O L D E R S , A S S O C I AT E S , B U S I N E S S PA R T N E R S A N D F R I E N D S : I am gratified to report that our Company performed well during an eventful and turbulent year. Throughout 2003, we faced the uncertainties of war and an unsettled economy. This inhospitable environment was exacerbated by increasingly value-conscious consumers shopping across channels, more cautious inventory planning by retailers and intensified competition. Yet, despite these and other challenges, at the close of 2003 we completed our thirty-second consecutive quarter of sales increases with sales up 14.1 percent for the full year.We finished 2003 with a healthy balance sheet and strong cash-flow position and delivered an increase in diluted earnings per share of 18.1 percent. Our performance in 2003 was the result of organic growth and notable contributions from recent acquisitions, com- bined with conservative inventory planning, tight expense controls and diligent working capital management. But there is no doubt that the bedrock of our ongoing success is our balanced portfolio strategy, which provides the flexibility to adapt quickly and profitably to the inherent unpredictability of the fashion industry. It is the diversity of our business – apparel and non-apparel, owned and licensed, wholesale and retail, men’s and women’s, domestic and international – that lets us appeal to the full range of consumers’ tastes, regardless of the size of their pocketbooks and where they choose to shop. The Liz Claiborne Brand, an American Icon As our portfolio has grown, Liz Claiborne’s share of our total business has become smaller, but it remains our single biggest contributor of sales and profit.Today, 28 years after its introduction, Liz Claiborne is the cornerstone of the better apparel zone in over 1,700 department stores. Indeed, we believe that Liz Claiborne fashion merchandise in 19 product classifications occupies more selling space in American department stores than any other brand. We continually seek ways to protect and enhance Liz Claiborne brand equity and profitability. For example, in 2003 we consolidated the Collection, Lizsport, Liz & Co. and Lizwear sub-brands under the Liz Claiborne name. This enables us to achieve substantial savings in design and manufacturing with fewer duplicate styles and more focused product offerings. Most importantly, it strengthens the selling floor presentation and consumer relevance of Liz Claiborne as a lifestyle brand offering stylish, versatile and sophisticated clothing that goes from career to casual and from work to weekend. Although at this writing, only a few weeks into the Spring 2004 selling season, it is early to assess the effect of this “one brand” strategy, the results are encouraging and attest to the enduring appeal of the brand. The Luxury Market 2003 saw increased consumer interest in luxury apparel and accessories, a market segment where our portfolio provides substantial diversity and competitive advantage. Ellen Tracy, Dana Buchman and Laundry by Shelli Segal fared very well as more consumers opted for the distinctive looks represented by each of these brands. Sigrid Olsen, with its unique styling, bold colors and unusual prints, turned in a standout performance, both in department stores and in our own new specialty stores. Juicy Couture, acquired in March 2003, is our newest luxury offering.These sexy, sophisticated basics have become “must haves” for celebrities and affluent, fashion- conscious consumers.
  13. 13. Brands for Trendier Consumers Our modern brands also had an excellent year. Lucky Brand retail stores and DKNY Jeans for men turned in strong performances, enhancing our position in the premium denim category. Mexx, our Netherlands-based designer and marketer of branded fashion apparel and accessories with an urban attitude, showed strong growth in Canada and the Benelux region and successfully increased its presence in Eastern European markets.The European look of Mexx has also been well-received by American consumers, to whom the brand was introduced via three specialty stores opened in the New York City metropolitan area during the past year. Our menswear brands benefited from increased consumer interest in updated styling. In addition to Lucky Brand and DKNY Jeans, Claiborne achieved substantial gains by modifying its design focus to appeal to more trend-aware consumers.Variations of updated styling also increased the appeal of our popular-priced Axcess men’s brand sold in Kohl’s and Mervyn’s. In 2004 we expect to continue building our share of the fashion-forward market with the Enyce and Lady Enyce streetwear brands acquired in the fourth quarter of 2003. Enyce positions us to appeal to young men, the category now experiencing the greatest gains in men’s apparel. Lady Enyce, a less developed but growing brand, mirrors the men’s line in fashion-forward streetwear looks for young women. Distributed primarily in specialty stores, Enyce and Lady Enyce have significant organic growth potential in apparel and through brand extensions. Accessories – Our Portfolio Within a Portfolio In 2003 our accessories lines were stellar performers, delivering a double-digit sales increase over the previous year. In large measure, this derives from our ability to replicate the diversification of our core strategy in an accessories portfolio that now consists of 15 brands. Each product in the accessories portfolio is “brand true,” reflecting the unique styling that characterizes the brand. For example, Juicy Couture handbags are entirely different in look and attitude from Lucky Brand handbags, and Liz Claiborne jewelry bears no resemblance to Ellen Tracy jewelry. This is achieved through our collaborative culture, whereby apparel and accessory teams for each brand work closely together to ensure design continuity and integrity. Licensing Opportunities Just as in accessories, our multi-brand portfolio provides considerable opportunity for growth in licensing. In 2003, licensing royalty revenues grew by 45 percent, and we expanded our roster to include 15 new licenses. Of particular interest is the addition of furniture to the floor coverings, decorative fabrics and bed and bath products offered under the Liz Claiborne Home brand.We believe Liz Claiborne Home is a major growth opportunity, since consumer research shows the Liz Claiborne name extends easily into many products in this category. Accordingly, in the first quarter of 2004, we announced a licensing agreement to offer home organizing products under the Liz Claiborne brand.This addition, and others being planned, allow us to take greater advantage of heightened interest in home environments, create new avenues of distribution through home furnishing retailers and enhance the importance of Liz Claiborne as an influence in all areas of a woman’s life.
  14. 14. We Are Wherever Consumers Shop Depending on the brand, our multi-channel, multi-geography strategy enables consumers to buy our products at more than 30,000 points of sale worldwide, including upscale, mainstream and promotional department stores, specialty and discount stores, in catalogs and on the Internet. Technology plays a key role in ensuring that we have the right products in the right stores at the right time. In U.S. department stores, for example, we are testing proprietary software and Internet-enabled market intelligence that allow us to analyze and automatically determine the optimal range of sizes for the consumers who shop at each store location. And in many of our own retail locations, sophisticated data-gathering register systems help track shoppers’ needs and provide information for targeted customer relationship marketing. Beginning with our acquisition of Mexx in 2001, international expansion has been and will continue to be a major source of growth, particularly in Europe.To help reach this goal, we will build upon Mexx’s unique understanding of the differences – and similarities – between European markets. Indeed, the Mexx organization in Holland is being transformed to function as a multi-brand platform for marketing selected U.S. brands in Europe.This process will be facilitated when Liz Claiborne Europe moves its headquarters to Amsterdam in 2004, where associates, systems, processes and technology will be merged with Mexx’s existing structures.We believe this decision will realize cost savings and unlock back-end synergies – a streamlining necessary for international growth. Our Popular-Priced Brands The past year’s economic uncertainty had its strongest impact upon the consumers of less expensive apparel and accessories. Nevertheless, our overall sales to this target segment increased 16 percent. Major contributors to this gain were Axcess, J.H. Collectibles and Crazy Horse. First Issue experienced real success at Sears and, as part of the retailer’s new casual focus, this brand will be rolled out chain-wide in 2004. Although we achieved substantial gains in what was a challenging market segment, we recognize that more needs to be done to drive growth.Therefore, we are modifying our pricing strategy to improve retailer turn and profitability, and further diversifying our portfolio with new brands that tap underdeveloped consumer needs in traditional and updated styles.These initiatives, combined with a more dynamic supply chain to enable faster response to consumer demand, will better equip us to capitalize on popular-priced business opportunities. Direct-to-Consumer Consistent with our determination to be wherever consumers choose to shop, we are expanding our owned and operated retail and e-commerce activities.These channels now account for approximately 20 percent of our total business, and we ended the year with nearly 500 specialty and outlet stores in our retail portfolio. In test phase, these include the three Mexx U.S. stores mentioned earlier, an Ellen Tracy store in an affluent New York suburb and six Sigrid Olsen locations sited to supplement underdeveloped department store distribution.We also continued to expand concept-proven Lucky Brand stores in the U.S. and Mexx stores in Europe and Canada. During the coming months, we plan to open more Sigrid Olsen and Mexx stores in the U.S., as well as a much-anticipated Juicy Couture specialty store in Las Vegas, Nevada.
  15. 15. Beyond specialty and outlet, our direct-to-consumer approach has a third prong – e-commerce.We are now operating four Internet sites for Elisabeth, Liz Claiborne, Lucky Brand and Mexx, respectively.We plan to open additional e-commerce sites as necessary to address increased consumer demand in this channel. Sourcing – A World of Change Our manufacturing and logistics teams, supported by fully automated, state-of-the-art distribution centers, again performed exceptionally, producing and transporting 260 million units on time and mitigating potential disruption from travel restrictions due to health and safety concerns. There is no question that our manufacturing and logistics operations will be significantly impacted by the end of quota restrictions in 2005.While we are confident that we will manage our way through these uncertain times, the next 15 months or so might hold some surprises. In view of this, we are keeping our sourcing configuration as broad as necessary and are reserving capacity early.We are also working especially closely with our logistics suppliers to ensure that we will have adequate capacity to process and move our goods. Since new developments – legislative and otherwise – will occur in 2004 and beyond, we cannot yet know how a quota-free world will ultimately impact our sourcing configuration.Therefore, we will have to monitor conditions closely and plan accordingly – the best way to ensure continued excellent service for our customers, consumers and shareholders. Growth Avenues Our growth has been and will continue to be driven by our underlying brand portfolio. Organic growth is a core component of our strategy. Brand extensions via accessories and licensing will be important contributors, as will be the constant evolution of apparel lines to penetrate new markets and address changing consumer tastes and shopping habits. Linked to our organic growth initiatives is a continuous focus on cost reduction to achieve gains in profitability as well as revenues. Acquisitions and internal development of new brands provide other important means of growth.These will be guided by opportunities to tap underserved or emerging market segments, be they defined by product concept, geography or channel. It is an approach that served us well in 2003, when we acquired Juicy Couture and Enyce and developed 16 “home grown” product lines. These include Realities, Intuitions and Jane Street in apparel, a range of accessories for Ellen Tracy, Lucky Brand, Axcess and Kenneth Cole and Spark and Curve Crush fragrances. Each of these additions brings new consumers to our business with minimal cannibalization of the existing portfolio. Challenges Although we were successful during a volatile and difficult year, we recognize that there is always the mandate to be better, smarter and faster. For example, the Liz Claiborne brand and our popular-priced lines need to offer more consistently responsive product, brought to market more quickly, with an even more appropriate price/value relationship. We need to have more frequent fashion infusions to capitalize on rapidly developing trends. We need to further expand our capacity to manage enterprises outside the United States.We must accelerate direct- to-consumer initiatives, including specialty stores and e-commerce, to better control our own destiny and to provide balance and diversity. As our portfolio grows through the development and acquisition of brands, we must enhance our ability to manage complexity. Despite our success, we must avoid smugness and complacency.
  16. 16. Management Strength Whatever its source, our growth will be enabled by an intense focus on organizational development, a culture of collaboration, an empowered management team and the dedicated efforts of more than 13,000 associates around the world.These factors, more than any others, are responsible for our success and give us confidence in the future. Let me take a moment to welcome Howard Socol to our Board of Directors. Since 2001, Howard has served as Chairman, President and Chief Executive Officer of Barney’s New York Inc. His broad retail experience, which parallels Liz Claiborne Inc.’s brand portfolio by encompassing a wide spectrum of distribution channels and consumer tastes, will make Howard a tremendous asset going forward. Looking Ahead The world in which we live is likely to become more challenging rather than less so in 2004. Many of the issues that confronted us in 2003 will continue and new and unexpected obstacles will arise. In the fashion business, as in so many other categories, consumers have abundant choice, oversupply is the norm and constant pricing pressure is a fact of life.These realities, combined with intense competition, create an environment in which market share gains, enhanced productivity and lower costs are essential to sales and profit growth. We believe that we are uniquely equipped to prosper in the face of these challenges.We offer a significant portfolio of great brands that address a variety of consumer tastes and serve multiple distribution channels the world over. This portfolio is supported by core competencies in design, sourcing, logistics and brand management, and the Company’s efforts are led by a talented and experienced management team. As we face the year ahead, we will continue to plan conservatively while remaining ready to move quickly when attractive opportunities arise. In sum, we are generally optimistic, believing that if we concentrate on what we do best – good concepts executed well – our Company is strongly positioned for future growth. Thank you for your support. Sincerely, Paul R. Charron Chairman of the Board and Chief Executive Officer
  17. 17. Our Licenses Dana Buchman Home Furnishings
  18. 18. PRODUCTS THE LICENSES OF LIZ CLAIBORNE INC. Dana Buchman Liz Claiborne Crazy Horse Lucky Brand Ellen Tracy Claiborne First Issue Villager Axcess Mexx A P PA R E L Dresses /Suits Dress Shirts Formalwear Intimate Apparel Kids Mainfloor Pants Outerwear Sleepwear/Loungewear Swimwear Tailored Clothing N O N - A P PA R E L Belts Cosmetics and Fragrances Eyewear Footwear Jewelry Legwear /Socks Men’s Accessories Neckwear /Scarves Sewing Patterns Slippers Umbrellas Watches Women’s Accessories HOME Bed and Bath Decorative Fabrics Flooring Furniture Home Storage Tabletop Footwear
  19. 19. T H E B R A N D S O F L I Z C L A I B O R N E I N C.* ATTITUDE AND STYLE PRICE RANGES PRODUCTS MARKETS DISTRIBUTION Owned and Operated Specialty Stores Independent Specialty Stores Upscale Department Stores Cosmetics and Fragrances Denim and Streetwear Promotional Chains Children’s Apparel Department Stores Women’s Apparel Central America Mass Merchants Factory Outlets South America Men’s Apparel United States E-Commerce Middle East Accessories Caribbean Australia Canada Relaxed Modern Popular Mexico Europe Classic Bridge Better Asia Axcess Bora Bora Candie’s** City DKNY** Claiborne Crazy Horse Curve/Curve Crush Dana Buchman DKNY Jeans /DKNY Active ** Elisabeth Ellen Tracy Emma James Enyce/Lady Enyce First Issue Intuitions Jane Street J.H. Collectibles Juicy Couture Kenneth Cole New York /Reaction Kenneth Cole** Laundry by Shelli Segal Liz Claiborne Lucky Brand Mambo Marvella Mexx Monet Monet 2 Realities Sigrid Olsen Spark Trifari Villager *As of March 2004 **Licensed to Liz Claiborne Inc.
  20. 20. Our Brands Mexx Ellen Tracy
  21. 21. Classic Crazy Horse Dana Buchman Elisabeth Ellen Tracy Emma James First Issue Liz Claiborne Realities Villager
  22. 22. Modern Axcess City DKNY Claiborne Intuitions Jane Street Juicy Couture Kenneth Cole New York Laundry by Shelli Segal Mexx Reaction Kenneth Cole Juicy Couture
  23. 23. Relaxed J.H. Collectibles Sigrid Olsen Sigrid Olsen
  24. 24. Denim and Streetwear DKNY Active DKNY Jeans Enyce Lady Enyce Lucky Brand DKNY Jeans
  25. 25. Jewelry Axcess Crazy Horse Ellen Tracy Intuitions Juicy Couture Kenneth Cole New York Liz Claiborne Lucky Brand Marvella Mexx Monet Monet 2 Reaction Kenneth Cole Realities Trifari Villager Liz Claiborne
  26. 26. Handbags Axcess Crazy Horse Ellen Tracy Intuitions Juicy Couture Liz Claiborne Lucky Brand Mexx Realities Sigrid Olsen Villager Juicy Couture
  27. 27. Fashion Accessories Axcess Claiborne Crazy Horse Elisabeth Ellen Tracy Intuitions Liz Claiborne Lucky Brand Mexx Realities Villager Liz Claiborne
  28. 28. Fragrances Bora Bora Claiborne Curve Curve Crush Ellen Tracy Liz Claiborne Lucky You Mambo Mexx Spark Men’s and Women’s Fragrances
  29. 29. Liz Claiborne Inc. 2003 Financial Statements Intuitions
  30. 30. Management’s Discussion and Analysis of Financial Condition and Results of Operations Management’s Discussion and Analysis of Financial Condition and Results of Operations OVERVIEW to 44.6% in 2003. This rate improvement reflects our efforts to better manage our inventories and a reduction in our manufacturing costs as result of a consolidation in our supplier base. In addition, our gross profit rate results reflect the Business/Segments acquisitions of MEXX Europe and MEXX Canada, MONET, Ellen Tracy and JUICY COUTURE, all of which operate at rates We operate the following business segments:Wholesale Apparel,Wholesale Non-Apparel and Retail. higher than the Company’s core better-priced businesses (see “Recent Acquisitions” below). As a result, operating income • Wholesale Apparel consists of women’s and men’s apparel designed and marketed worldwide under various trademarks owned has grown 57% to $470.8 million in 2003 from $299.8 million in 1999, and diluted EPS increased 63% to $2.55 in 2003 by the Company or licensed by the Company from third-party owners.This segment includes our businesses in our core LIZ from $1.56 in 1999. CLAIBORNE brand along with our better specialty apparel (INTUITIONS, SIGRID OLSEN and REALITIES), bridge priced (DANA BUCHMAN and ELLEN TRACY), men’s (CLAIBORNE), moderate-priced special markets (AXCESS, CRAZY HORSE, Net Sales EMMA JAMES, FIRST ISSUE,VILLAGER and J.H. COLLECTIBLES), premium denim (LUCKY BRAND DUNGAREES) and Net sales in 2003 were a record $4.241 billion, an increase of $523.6 million, or 14.1%, over 2002 net sales.Approximately contemporary sportswear and dress (LAUNDRY, JUICY COUTURE, JANE STREET, ENYCE and SWE) businesses, as well as our $252.9 (or 48.3%) of the sales increase was due to the inclusion of a full year’s sales for our MEXX Canada and ELLEN TRACY licensed DKNY® JEANS, DKNY® ACTIVE, and CITY DKNY® businesses and our licensed KENNETH COLE NEW YORK and businesses (each acquired in 2002) and the impact of the 2003 acquisitions of the JUICY COUTURE and ENYCE businesses. REACTION KENNETH COLE businesses.The Wholesale Apparel segment also includes wholesale sales of women’s, men’s and Approximately $226.2 million (or 43.2%) of the sales increase was due to increased net sales reported by our comparable children’s apparel designed and marketed in Europe, Canada, the Asia-Pacific Region and the Middle East under our MEXX international businesses; of this sales increase, $145.2 million (representing 27.7% of our overall sales increase) was due to the brand names. impact of foreign currency exchange rates, primarily as a result of the strengthening Euro on the reported results of our • Wholesale Non-Apparel consists of accessories, jewelry and cosmetics designed and marketed worldwide under certain of the international businesses.These results were achieved notwithstanding a further sales decrease in our core LIZ CLAIBORNE above listed and other owned or licensed trademarks, including our MONET,TRIFARI and MARVELLA labels. better-priced department store business.This business has been, and will continue to be, challenged by increased competition • Retail consists of our worldwide retail operations that sell most of these apparel and non-apparel products to the public in the department store channel as a result of the introduction of new offerings by our competitors and the growth in through our 263 outlet stores, 235 specialty retail stores and 553 international concession stores (where the retail selling department store private label brands and increasingly conservative buying patterns of our retail store customers as they focus space is either owned and operated by the department store in which the retail selling space is located or leased and on inventory productivity and seek to differentiate their offerings from those of their competitors. In addition, the operated by a third party, while, in each case, the Company owns the inventory).This segment includes stores operating department store channel has been challenged by the migration of consumers away from malls to national chains and off- under the following formats: MEXX, LUCKY BRAND DUNGAREES, LIZ CLAIBORNE, ELISABETH, DKNY® JEANS, DANA price retailers, as well as a general decline in prices for non-luxury apparel products.Accordingly, we are planning our 2004 BUCHMAN, ELLEN TRACY, SIGRID OLSEN and MONET, as well as our Special Brands Outlets which include products core LIZ CLAIBORNE business down in the mid-teens on a percentage basis. In addition, our moderate businesses are from our Special Markets divisions. On February 20, 2003, we announced our decision to close our 22 LIZ CLAIBORNE expected to face similar challenges in 2004, and as a result we are also planning sales for this component of our business to domestic Specialty Retail stores (see Note 13 of Notes to Consolidated Financial Statements). be down in the mid-teens on a percentage basis.We believe these expected declines will be more than offset with increases The Company, as licensor, also licenses to third parties the right to produce and market products bearing certain in other brands within our portfolio, including MEXX, as well as our recently-acquired JUICY COUTURE and ENYCE brands, Company-owned trademarks.The resulting royalty income is not allocated to any of the specified operating segments, but which will include a full year’s sales in 2004. In addition, we expect to continue to pursue our acquisition strategy, seeking is rather included in the line “Sales from external customers” under the caption “Corporate/Eliminations” in Note 20 of out opportunities that are on strategy, financially attractive and involve manageable execution risks. We note that our 2003 Notes to Consolidated Financial Statements. fiscal year was comprised of 53 weeks, as compared to 52 weeks in 2002; however, we do not believe that this extra week had a material impact on our overall results. Competitive Profile We operate in global fashion markets that are highly competitive. Our ability to continuously evaluate and respond to Gross Profit and Net Income changing consumer demands and tastes, across multiple market segments, distribution channels and geographies, is critical Our gross profit improved in 2003 reflecting continued focus on inventory management and lower sourcing costs, offsetting to our success.Although our brand portfolio approach is aimed at diversifying our risks in this regard, misjudging shifts in gross margin pressure resulting from a highly promotional retail environment. Our gross profit also benefited from the consumer preferences could have a negative effect. Other key aspects of competition include quality, brand image, acquisition of JUICY COUTURE, the growth of our MEXX Europe business and the inclusion of a full year’s activity for distribution methods, price, customer service and intellectual property protection. Our size and global operating strategies our ELLEN TRACY business, as each of these businesses run at gross profit rates higher than the Company average. Overall help us to successfully compete by positioning us to take advantage of synergies in product design, development, sourcing net income increased to $279.7 million in 2003 from $231.2 million in 2002, reflecting the benefit received from our sales and distributing of our products throughout the world. We believe we owe much of our recent success to our having and gross profit rate improvements. successfully leveraged our competencies in technology and supply chain management for the benefit of existing and new Balance Sheet (both acquired and internally developed) businesses. Our success in the future will depend on our ability to continue to Our financial position continues to be strong.Although our cash flow from operations decreased by $1.8 million, our cash design products that are acceptable to the marketplaces that we serve and to source the manufacture of our products on a on hand increased by $81.9 million. Although our net sales and net income increased 14.1% and 21.0%, respectively, competitive basis, particularly in light of the impact of the elimination of quota for apparel products scheduled for 2005. accounts receivable and inventory increased only 5.5% and 5.2%, respectively.We were able to finance nearly all of our 2003 We expect that the anticipated elimination of quota will result in a general reduction in the cost of sourcing and cash requirements with cash flow from operations. manufacturing apparel products; however, there can be no assurances that the cost savings will be directly reflected in the Company’s gross profit rate. In addition, the change to a quota-free environment may present operational challenges to the International Operations Company and other apparel companies as the transition is made to the new quota regime. Revenues for the last five years are presented on a geographic basis as follows: Reference is also made to the other economic, competitive, governmental and technological factors affecting the Company’s operations, markets, products, services and prices as are set forth under “Statement Regarding Forward-Looking Disclosure” below and in our 2003 Annual Report on Form 10-K, including, without limitation, those set forth under the 2003 2002 2001 2000 1999 IN THOUSANDS heading “Business-Competition; Certain Risks.” Domestic $3,304,614 $3,037,325 $3,031,318 $ 2,984,927 $2,701,272 2 0 0 3 O V E R A L L R E S U LT S International 936,501 680,1 78 417,204 119,214 105,276 Over the past five fiscal years, the Company’s revenues have grown to a record $4.241 billion in 2003 from $2.807 billion Total Company $4,241,115 $3,717,503 $ 3,448,522 $3,104,141 $2,806,548 in 1999.This growth has been largely a result of our brand portfolio strategy, under which we strive to offer consumers apparel and non-apparel products across a range of styles, price points and channels of distribution. In implementing this In 2003, sales from our international segment represented 22.1% of our overall sales, as opposed to 3.8% in 1999, primarily strategy, we have acquired a number of businesses, most of which have experienced notable growth post-acquisition. Our due to our acquisitions of MEXX Europe and MEXX Canada and, to a lesser extent, MONET.We expect our international revenue growth over the period also reflects the growth of our moderate-priced Special Markets business, which sells sales to continue to represent an increasingly higher percentage of our overall sales volume as a result of further anticipated products at prices lower than our core better-priced offerings, and our non-apparel businesses.With our acquisitions and growth in our MEXX Europe business and the planned launch of a number of our brands in Europe utilizing the MEXX the growth in our moderate and non-apparel businesses, we have diversified our business by channels of distribution and corporate platform, including ELLEN TRACY and LUCKY BRAND DUNGAREES. Accordingly, our overall results can be target consumer, as well as geographically. Over the five-year period, our gross profit rate has improved from 39.1% in 1999 Liz Claiborne Inc. & Subsidiaries Liz Claiborne Inc. & Subsidiaries 38 39