NEW YORK — Gross margin erosion offset a slight sales gain to push Bernard Chaus Inc.’s profits down 77.3 percent in the fourth quarter.

The New York-based maker of women’s career and casual sportswear said income for the three months ended June 30 declined to $440,000, or 1 cent a diluted share. That compares with income of $1.9 million, or 7 cents, in the same period last year, including a tax benefit and other one-time gains totaling $1.1 million, or 4 cents. Excluding the nonrecurring benefits, last year’s income was $800,000, or 3 cents. Sales for the quarter edged up 2.6 percent to $33.6 million from $32.7 million, but gross margin declined 201 basis points to 23.3 percent of sales from 25.3 percent, accounting for the lower earnings.

Ending its streak of five quarters of profit gains, Nick DiPaolo, chief operating officer, said in a statement the company is taking the right steps to ensure long-term growth.

“As we look ahead to 2004, our objective is to continue to leverage the efficient infrastructure we now have in place and to increase sales by building on the early and encouraging results we have seen from our acquisition of certain assets of S.L. Danielle, which has given us a growth platform in the exclusive and private label business,” DiPaolo said.

In addition, he said the company plans to continue working closely with its department store customers to ensure the Josephine Chaus lines are best positioned on the selling floor.

For the year, Chaus reported income of $4.7 million, or 16 cents a diluted share, reversing a loss of $2.2 million, or 8 cents, in the prior year, including the non-recurring gains. Sales fell 3.8 percent to $140.2 million from $145.8 million.

“The strong increase in profitability Chaus delivered in fiscal 2003 is a clear reflection of the successful steps we have taken over the past 18 months to best manage our business within the difficult economic and retail climate,”Josephine Chaus, chairman and chief executive, said in a statement.

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