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Recession Pressures Profits at Swank

Markdowns and double-digit revenue slide weigh on margins.

Fourth-quarter profits for Swank Inc. tumbled more than 25 percent as the slowdown in consumer spending and anemic holiday shopping impacted sales of men’s accessories.

Net income for the maker of belts, leather goods and accessories fell 25.4 percent to $2.6 million, or 35 cents a diluted share, for the three months ended Dec. 31 from $3.5 million, or 81 cents a diluted share, in the 2007 quarter. Results for the most recent quarter were helped by $2 million of pretax income from an insurance settlement. Income from operations exclusive of the insurance benefit dropped 60.6 percent to $2.5 million.

Revenue for the company, which licenses brands such as Nautica, Tommy Hilfiger and Guess, sunk 19.2 percent to $34.8 million, compared with $43.1 million a year earlier. Higher merchandise markdowns and lower net sales contributed to a reduction in gross margin to 31.4 percent from 36.2 percent in the prior-year period.

“This past holiday season was one of the most difficult in recent memory,” said John Tulin, Swank’s chairman and chief executive officer. “While we are disappointed that earnings were lower than last year, we are pleased with our performance in light of the very challenging conditions.”

The recession similarly took a toll on Swank’s year-end results. Income for the 12-month period tumbled 57.8 percent to $2.1 million, or 35 cents per diluted share, from $4.9 million, or 81 cents per diluted share, for the same period last year. Revenues were off 11.4 percent to $114 million from $128.6 million.

While the consumer slowdown led to lower shipments for the year, the company said the drop was softened by solid performance within some of its private label programs. Shipments of its Tumi accessories collection also increased.

“These difficult times demand that we remain even more vigilant about managing costs, inventories and cash flow, which will be our primary focus this year,” Tulin continued. “However, at the same time, we must also be prepared to take advantage of new business and licensing opportunities.”