NEW YORK — Fruit of the Loom’s stock dropped 1 7/8, to 26 7/8 on the New York Stock Exchange Wednesday, following a warning to analysts that costs of retraining workers, as well as trouble meeting demand, will further dent second-quarter earnings.
A spokesman said orders are strong and there is a good backlog, but the company underestimated the demand for some products and has not been able to produce enough merchandise.
In late 1993, when fleecewear demand was slack, FTL fired 2,000 workers, mainly sewers. This year the company rehired the same number, including many of its former employees, as demand picked up. However, costs to retrain these workers and cross-train them for greater flexibility, combined with inability to meet demand, will depress the second quarter.
The spokesman said the Wall Street analysts’ consensus prior to the news, given at a conference Wednesday, was 71 cents a share for the second quarter. Now about 50 cents a share for the quarter, and $2.15 to $2.25 for 1994, is more appropriate, he said.
In the year-ago second quarter, FTL earned 77 cents a share and for 1993, $2.25 before special items. Meanwhile, asked about FTL’s negotiations to acquire the CK Calvin Klein jeanswear business from the designer’s company, the spokesman said talks were still pending, but he had no other details.
As for the earnings downturn, the spokesman insisted the problems were a second-quarter phenomenon, and that the company will be well positioned for 1995. He noted FTL is also investing $26 million in new machinery, mostly to eliminate some direct labor charges in sewing, to save money in 1995. There are also costs to start up two regional distribution centers in the U.S. and one in Germany, and to phase out 13 smaller, less efficient centers, he said.