Standard & Poor's Cuts Rating on Liz Claiborne

Standard & Poor's Ratings Services lowered its rating on Liz Claiborne Inc. further into junk status on Monday, saying the clothing company's poor performance was expected to continue for the remainder of the year.

The rating agency lowered its rating on the New York-based retailer two levels to B, from BB- and said the company's outlook was negative.

As of July 4, Liz Clairborne had about $1.6 billion in outstanding debt.

"The downgrade reflects the continued poor operating performance in the second quarter and our expectation that such weak performance will continue for the remainder of fiscal 2009 and that operating results will not begin to improve until the first or second quarter of fiscal 2010," the ratings agency said in a statement, blaming the company's troubles on the recession, which caused a drop-off in consumer spending.

S&P said the company's cost-cutting actions and lower inventory levels haven't been enough to compensate for the decrease in sales.

Earlier this month, the apparel-maker said its second-quarter loss widened to $82.1 million, or 87 cents, per share. That compares with a loss of $23.1 million, or 25 cents per share, during the same period a year ago.

Loss from continuing operations was $76.7 million, or 82 cents per share, compared with a loss of $13.8 million, or 15 cents per share, last year.

Adjusted loss from continuing operations was 48 cents per share, which accounts for a charge related to changes in foreign currency exchange rates. The results also exclude expenses related to brand-exiting actions and goodwill impairment charges.

Meanwhile, sales slipped 29 percent to $683.8 million for the three months that ended July 4. That's down from $963.4 million the year before.

In addition to its eponymous line of women's wear Liz Claiborne's brands include Juicy Couture, Lucky Brands, MEXX and Kate Spade.

Liz Claiborne shares fell 35 cents, or 9.5 percent, to $3.32 in Monday trader amid broader market declines.

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