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Cost-Cutting Pays Off As Fila Losses Decline

NEW YORK — Plunging costs and lower debt allowed Fila Holding SpA to substantially cut its loss in the fourth quarter.<br><br>For the three months ended Dec. 31, the Biella, Italy-based footwear and sportswear company reported a net loss of $16.6...

NEW YORK — Plunging costs and lower debt allowed Fila Holding SpA to substantially cut its loss in the fourth quarter.

This story first appeared in the March 5, 2003 issue of WWD.  Subscribe Today.

For the three months ended Dec. 31, the Biella, Italy-based footwear and sportswear company reported a net loss of $16.6 million, or 38 cents a diluted American depository share (ADS), just more than one-third the prior-year loss of $46.7 million, or $1.52.

Net revenues for the period fell 18 percent to $180.6 million from $220.3 million a year ago. Figures have been converted from euros by the company at an average rate of exchange.

In a statement, chief executive officer Marco Isaia said the better results stemmed from “both a significant reduction in fixed costs and an improvement in gross profit, testifying to our efforts to improve every item in our statement of operations.”

Expense reductions were evidenced by a 320-basis-point improvement in gross margin to 38.5 percent of revenues from 35.3 percent in the prior-year quarter. As a result, gross profit for the period expanded more than 1,000 basis points to 42.1 percent of revenues.

As reported last week, Cerberus, a New York-based investment firm, is said to be closing in on the purchase of Fila from parent Holding di Partecipazioni Industriali. HdP has been trying to sell Fila and its massive debt since June 2001. As of Dec. 31, total debt stood at $206.9 million, 41.9 percent lower than the $356.1 million carried as of last Sept. 30. The debt reduction came from a share capital increase of $114.9 million. Debt and capital data are converted from the euro at current exchange.

Apparel sales during the quarter fell 10 percent in the U.S., 3 percent in Europe and 12 percent in the rest of the world. Footwear fared worse, with a 26 percent drop in the U.S., a 29 percent decrease in Europe and a 48 percent decline elsewhere.

Overall, for the full fiscal year, Fila lost $76.4 million, or $2.26 a diluted ADS. That compares with last year’s wider loss of $125.2 million, or $6. Net revenues for the year regressed 1.8 percent to $859.5 million.