Swank Inc. on Tuesday reported a second-quarter profit, versus a year-ago loss, on higher sales and reduced selling and administrative expenses. Shares of the accessories firm increased 13.6 percent in over-the-counter trading.
In the three months ended June 30, New York-based Swank registered net income of $401,000, or 7 cents a diluted share, compared with a net loss of $128,000, or 2 cents, in the year-ago quarter. Sales advanced 2.9 percent to $26.5 million from $25.8 million as strength in belts and personal leather accessories and fewer markdowns, as well as cooperative advertising expenses, offset weakness in its luxury business, some of it the result of large initial orders shipped during the first half of 2008, when Swank entered the luxury sector.
Gross margin declined to 30.6 percent of sales from 33 percent a year ago. But a 13.6 percent cut in selling and administrative expenses, to $7.4 million, without reducing its head count, and a more than 50 percent reduction in interest expense, to $95,000, helped lock in the return to profitability. John Tulin, chairman and chief executive officer, said bank borrowings and inventory levels had been cut 46 and 28 percent, respectively, since the start of the fiscal year.
“Accessories always do relatively well in a recession, and we’re fortunate to be working with price points that work in a mediocre to rotten economy,” Tulin said. “Of course, we’d like more people to be working, but we’ve been very aggressive in terms of market share. There are a lot of stores where accessories are opening price points, and that’s helped.”
Without specifying dollar amounts, Tulin described the drop-off in luxury as “severe. Unfortunately, not only is Tumi a luxury brand, but it’s a travel-related luxury brand. It’ll spring back and is starting to show some improvement, although the more moderate businesses are performing quite well.”
In the six months, Swank, which markets several of its own and licensed brands, registered net income of $122,000, or 2 cents a diluted share, versus a loss of $539,000, or 9 cents, as sales remained flat at $50.5 million.
Shares ended trading Tuesday at $2.50, up 30 cents.