For the three months ended Jan. 31, the loss was $3.1 million, or 14 cents a share, compared with a loss of $1.6 million, or 7 cents, in the year-ago quarter. Last year’s fourth quarter included noncash income connected with the company’s overfunded pension plan and a gain from the plan’s termination. Excluding the pension-related items, last year’s loss would have been 30 cents.
Sales in the quarter fell 13 percent to $470 million from $540.3 million, reflecting the softness in the economy and cautious buying by the consumer. Women’s sportswear sales were down 16 percent to $56 million, men’s sportswear was down 14 percent to $13 million and other soft goods — which include intimate apparel — dipped 2 percent to $2 million.
Hal J. Upbin, chairman, president and chief executive officer, said in a statement: “Total overhead has been reduced by approximately $50 million, or 9 percent, on an annualized basis. The company has closed all of its domestic sewing operations and has moved more of its sourcing to contractors in the Far East.”
Kellwood also reduced its debt by 38 percent to $209 million from the prior year. Its ratio of debt-to-capital dropped to 42 percent from 56 percent a year ago. In addition, steps to reduce inventory and debt resulted in $69 million of cash and other investment income, up $59 million from the prior year.
Because the company is unable to predict when consumers will return to previous levels of apparel spending, it is projecting a 9 percent drop in fiscal 2002 sales to $2.1 billion. Earnings per share for the current fiscal year, which ends next January, are projected in the range of $1.80 to $1.90, but could be impacted by a potential first-quarter charge.
Upbin said that the company is analyzing its sourcing and distribution infrastructure. Because global markets favor sourcing piece goods and finished product out of the Far East, as well as the downturn in the economy, Kellwood had some excess capacity in its warehousing and distribution network. If the firm decides to take certain actions to align its operations with the current business trends, it would take a charge of 40 cents a share in the first quarter, which ends April 30.
First-quarter earnings per share before the charge are projected at between 53 and 58 cents, an estimate that also includes an anticipated 20 percent drop in sales to $550 million.
For the year, income was down 38 percent to $37.7 million, of $1.65 a diluted share, from $60.8 million, or $2.57 a share, a year ago. Sales declined by 3.4 percent to $2.3 billion from $2.4 billion. Women’s sportswear volume decreased 7 percent to $1.5 billion, while men’s sportswear dipped 4 million to $348 million. Sales of other soft goods, however, rose 15 percent to $419 million, due in part from growth of the firm’s new intimate apparel private label programs.