Men’s accessories vendor Swank Inc. reversed a year-ago loss to post a second-quarter profit on a 9.3 percent sales increase highlighted by stronger sales of men’s jewelry and personal leather goods.
Net income for the three months ended June 30 was $1.4 million, or 26 cents a diluted share, versus a net loss of $61,000, or 1 cent, in the year ago quarter. Sales rose to $32.2 million from $29.4 million in the prior-year period, while gross margin advanced to 34.1 percent of sales from 29.4 percent in the 2010 quarter.
The quarter’s results also benefited from the reversal of a reserve for customer returns of $2.2 million versus $782,000 in the year-ago quarter.
John Tulin, chairman and chief executive officer of the New York-based firm, told WWD that Swank had put more aside to cover returns in anticipation of more difficult market conditions than the company encountered. “We decided we were going to be a little aggressive on our reserves, but our return experience was much better than expected,” he said.
Referring to the company’s 470-basis-point improvement in gross margin, Tulin noted that, prior to the start of the year, “we just took the position that the margin isn’t going to come to us, that we had to be really smart about improving how we buy, logistics and make sure we didn’t do anything to cheapen our product.”
That effort bore fruit with cost of goods sold increasing 1.9 percent to $21.2 million, allowing gross profit to expand 27.1 percent to $11 million.
Sales of men’s jewelry and personal leather goods excelled, with Tumi especially strong in the latter category, but Tulin noted that the men’s belt business remained “healthy...not as strong as last year but not bad at all.” Belt shipments decreased as a special program with Costco wasn’t repeated.
The ceo said that “the third quarter has been OK so far. We were expecting a pretty solid quarter and we still are. Like everyone else absorbing the debt crisis, the downgrade and the stock market’s swings, we’re concerned but we just don’t know how the consumer is going to respond. Our consumers have had so many shocks to their systems.
For the six months, net income came in at $1.5 million, or 26 cents a diluted share, versus a loss of $518,000, or 9 cents, in 2010. Sales were up 5.8 percent to $58.2 million.
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