NEW YORK — A one-time write-off for its Rockefeller Plaza store and weakness in its women’s jeans forced Nautica Enterprises Inc.’s third-quarter profits down to just over half of year-ago levels.
For the three months ended Nov. 30, the New York-based apparel manufacturer reported net income plunged 46.5 percent to $7.3 million, or 21 cents a diluted share. That compares with last year’s earnings of $13.6 million, or 40 cents.
Excluding special aftertax charges of $6.5 million, or 19 cents, for the write-down of fixed assets at Nautica’s Rockefeller Plaza store, profits would have increased 1.1 percent to $13.7 million, or 40 cents, 1 cent higher than projected by Wall Street analysts.
Sales for the period inched up 3 percent to $207.1 million from $201 million a year ago. Of that, royalty revenue grew 24.1 percent to $2.5 million from $2 million last year.
Chief executive officer Harvey Sanders said on a conference call Friday that the women’s jeans division performed to plan and achieved year-over-year increases, but "not at the profitability levels that we had originally anticipated."
"As we said in our last conference call," Sanders stated, "we have seen the momentum in this business start to slow, and we experienced a greater percentage of markdowns than a year ago. We have been working to reposition the product. We are pleased with the new line as it has a younger and more fashionable design."
Of the overall jeans business, Sanders said on the call, "the business increased year-over-year as a result of continued strong sales in Europe, as well as the contribution of sales from our newly launched men’s line. This, however, offsets some weakness in our U.S. business."
As reported, Bonnie Takhar, formerly managing director of Earl Jean European business, is now heading the Earl Jean business globally. "A new design direction for fall, coupled with new sales management, has us encouraged about our prospects for the second half of fiscal 2004," the ceo noted.
Sanders said sportswear division results "were in line with our internal plan for the quarter. However, we were disappointed with the overall performance as the highly promotional retail environment led to lackluster selling during the period. We continue to evaluate ways to continue to drive the sportswear business and have stepped up our penetration of pants," which now represent 12 percent of offerings. That’s twice their previous level, but 8 points lower than a figure Sanders believes would be optimal.Sleepwear was a "standout" in the quarter, logging a double-digit increase. It’s been expanded in recent years to include Nautica men’s and women’s sleepwear, Nautica men’s underwear and a new junior sleepwear line under the Nautical Blue label.
Overall, for the first nine months of the year, Nautica said net earnings sank 41.2 percent to $15.1 million, or 44 cents a diluted share. That compares with last year’s profits of $25.7 million, or 75 cents.
Excluding special aftertax charges of $2.1 million, or 6 cents, for severance costs related to the closure of a distribution center, as well as the aforesaid Rockefeller Plaza item, Nautica would have recorded a more modest 7.9 percent decrease in earnings to $23.6 million, or 69 cents.
Sales for the period retreated 3.4 percent to $515.2 million from $535.5 million a year ago.
In guidance, Nautica said it believes it can achieve mid- to high-single digit fourth-quarter sales growth and remains comfortable with the Wall Street estimate of 21 cents a diluted share for the period. For fiscal 2004, the company expects sales to remain essentially flat with those of 2003, and anticipates full-year earnings per share of $1.00 to $1.10 because of a combination of gross margin improvement and selling, general and administrative expenses leverage.
Shares of Nautica closed up 57 cents, or 5.1 percent, to $11.86 in Nasdaq trading Friday.
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