• The Wall Street Journal (subscription required), Wednesday, May 2, 2007 11:30 AM

Yesterday's unexpected 65% plunge in first-quarter earnings showed that despite strategic moves, Liz Claiborne faces the same wrenching questions as its struggling competitors. While acquiring new brands helped to reduce its reliance on shrinking department stores, the company's core business--women's labels like Ellen Tracy, Dana Buchman and Liz Claiborne--remain vulnerable to the changing retail landscape.

Since Federated Department Stores bought May Department Stores in 2005, the combined company has shuttered approximately 90 stores and increased its focus on in-store brands rather than mass-market labels. At the same time, middle-market retailers like J.C. Penney Co. and Kohl's Corp. are demanding exclusive brands that can't be found elsewhere.

New CEO William McComb told analysts to expect a "sea change" in the way Liz Claiborne runs its wholesale business. He described his strategy as "the three M's": multibrand, multichannel and multigeography.

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