NEW YORK – Pushed-back deliveries, discontinued lines and higher chargebacks all contributed to a first-quarter loss at Hartmarx Corp., but the company didn’t deviate from its forecast of improvement later in the year.
In the three months ended Feb. 28, the Chicago-based apparel firm endured a net loss of $3.4 million, or $0.09 a diluted share, versus net income of $2.6 million, or $0.07 a diluted share, in the year-ago quarter. Analysts had expected Hartmarx to earn $0.02 a share, on average.
Sales declined 16.8% to $120 million from $144.2 million in last year’s quarter. Among the factors reducing the top line were the elimination of the Kenneth Cole and Jhane Barnes tailored clothing licenses, the shift of some tailored clothing shipments to the second quarter of this year from the first quarter of last year and reductions in the firm’s investment in moderately priced tailored clothing to mainstream department stores.
Homi Patel, chairman and chief executive officer, noted that, in last year’s quarter, the Cole and Barnes lines were responsible for about $3.9 million in volume, while the shift to second quarter deliveries deprived the company of about $13 million in revenue, based on last year’s performance.
“Despite the poor first quarter operating results, we continue to expect a significant earnings recovery for the full year of 2007 compared to 2006,” Patel said, adding the firm was maintaining earlier guidance calling for full-year earnings of $0.50 to $0.56 a diluted share on sales of $585 million to $600 million.
“We are starting to realize the benefits from the actions we initiated last year and we expect to return to profitability in the second quarter with significant favorable comparisons to the prior year occurring in the second half of the year,” he continued.
Among the signs of progress cited in the first-quarter report were a reduction in sales of moderate priced brands marketed to mainstream department stores to about 13% of the total from 18% last year. The women’s business, in which Hartmarx has made a series of acquisitions at the high end of the market, accounted for 25% of sales versus 16% a year ago. The most recent of the purchases, the One Girl Who… and Zooey brands, were responsible for $3.6 million in first-quarter sales but cost the firm $0.01 of EPS.
With the exception of moderate tailored clothing, Patel said “other product categories performed satisfactorily. Tailored clothing and sportswear at the better and luxury price points are selling well at retail.”
Patel reported that the company will open a Hickey-Freeman retail store in downtown San Francisco in the fall and is actively seeking other retail locations.
Gross margin declined to 33.4% of sales from 33.5% in the 2006 period.