By  on July 7, 2011

Tandy Brands Accessories is slimming down.

Having just completed an unprofitable fiscal year characterized by declining sales, the Dallas-based accessories marketer is exiting noncore categories, such as eyewear and hunting gear, to focus on its key businesses in belts, small leather goods and gifts. It expects to reduce its headcount, currently about 400 full-time employees, by about 15 percent, to about 340, and improve its earnings before interest, taxes, depreciation and amortization by between $4 million and $5 million in the fiscal year that began July 1.

The company will incur pretax charges of $4.5 million to $5.5 million, including inventory impairment for the discontinued categories and termination costs, all of them recognized in the final quarter of the just concluded year. Fourth-quarter and full-year results are expected to be reported in late August.

“We’re getting out of categories that were generally low-volume with lots of sku’s,” Rod McGeachy, president and chief executive officer, told WWD Thursday. “They led to an inventory bloat and forecasting inaccuracies. They added complexity, hurt margins, required lots of management attention and didn’t earn back the cost of capital.”

He declined to give a figure for the volume of the businesses being discontinued. Among these, he noted, were selections of Mardi Gras beads and gunslings.

With the business focused on core accessories categories, “we expect a dramatic turnaround in profitability. We expect this to help put us in the black in fiscal 2012,” he said.

In the first nine months of the just concluded year, sales fell 11.2 percent to $100.5 million, from $113.2 million in the comparable 2010 period, while the firm’s net loss reached $5 million, versus a $4.6 million profit in the prior-year period. EBITDA for the nine months constituted a loss of $4.1 million against a $357,000 operating loss in the 2010 period.

Gross margin for the nine months receded to 33.1 percent of sales from 37.3 percent. Accessories accounted for nearly 80 percent of volume during the first three quarters of the year.

McGeachy joined Tandy in his current post in October 2008 and realigned management and cut back on the firm’s workforce within the first months of his tenure. The company acquired the principal assets of Chambers Belt Co., a move the ceo described at the time as “highly accretive,” added eyewear to its assortment in 2009 and became the licensee for Eddie Bauer gifts earlier this year. Totes, Wolverine, Haggar, Levi Strauss Signature and Surplus are among its other licensed brands.

“We’re intent on focusing on categories where we have a real competitive advantage through our brands and customer relationships,” McGeachy said.

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