By  on May 26, 2010

Rafaella Apparel Group Inc. narrowed its third-quarter loss despite a reduction in sales.

The women’s sportswear firm said the loss attributable to stockholders for the three months ended March 31 was $25,000 compared with a $1.3 million loss a year ago. Excluding the $1 million in dividends accrued on redeemable convertible preferred stock, the company’s net income was $975,000 against a loss of $276,000 last year.

Sales in the third quarter fell 3.3 percent to $33.4 million from $34.6 million. Despite the slip, cost of sales declined 9.2 percent to $22.5 million, and gross profits rose 11.5 percent to $10.9 million, in the quarter. Gross margin hit 32.7 percent of sales versus 28.4 percent in the year-ago period.

The company said in a regulatory filing with the Securities and Exchange Commission that an arbitrator on April 10 issued an award directing the firm to pay $400,000 to Kobra International Ltd., which does business as Nicole Miller. The parties were disputing Rafaella’s decision to suspend performance under a licensing agreement. Kobra initially sought $1.5 million in damages.

Additionally, Rafaella said it exited one of its warehouses, in Bayonne, N.J., during the first quarter of this year.

For the nine months, the loss was $553,000, versus the $18.6 million loss last year. Sales fell 29.1 percent to $88.1 million from $124.1 million.

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