Label Blunder Sinks Wilsons Q4 Net

NEW YORK – Wilsons the Leather Experts weathered a steep decline in fourth-quarter profits, and a full-year loss, as its move into private-label outerwear failed to arouse consumer excitement.

In the three months ended Feb. 3, net income plummeted 71.3% to $12 million, or 31 cents a diluted share, from $41.7 million, or $1.04, in the 2005 quarter. Net sales were down 25.7% to $133 million from $178.9 million in the prior-year period, and comparable-store sales were down 21.6% on top of a 10% decline in the 2005 period.

Michael Searles, chairman and chief executive officer, noted that the results were a disappointment from virtually every perspective. “We considered any improvement over our 2005 fourth-quarter comparable-store sales decrease of 10% to be some evidence that our strategies were beginning to take hold,” he said. “A comparable-store sales decrease of 21.6% during the fourth quarter has clearly shown us that the strategic course we have embarked upon needs refinement.

“As we build our Wilsons Leather brand, we have made a strategic decision to dedicate a portion of our inventory starting this fall to recognizable outerwear brands to increase the willingness of our customers to cross the lease line,” he concluded.

He termed the average dollars per transaction “encouraging,” but the number of transactions “unacceptable.”

The Minneapolis, Minnesota-based outerwear retailer released its results after the markets closed on Tuesday but its shares dropped about 5% in after-hours trading overnight. Further downward pressure is likely Wednesday considering that the fourth-quarter EPS of 31 cents is 17 cents below the analyst consensus estimate of 48 cents.

For the full year, the firm incurred a loss of $33.1 million, or 85 cents a diluted share, against a profit of $12.2 million, or 31 cents, in fiscal 2005. Net sales declined 19.3% to $321.3 million from $398 million in the prior year. Comparable-store sales were off 17.2%.

At the end of the fiscal year, the company operated 417 stores in 45 states, including 287 mall locations, 116 outlets and 14 airport stores.