NEW YORK — The Tarrant Apparel Group is expecting to post a steep loss for 2004 as the apparel supplier records currency-related charges to its books.
The company also is anticipating significantly softer sales in the second half as retailers were less aggressive following a lackluster back-to-school shopping season.
As a result, for 2004 Tarrant is looking at a net loss of $96.9 million to $98.9 million on revenues of $157 million to $162 million, which compares with a net loss in 2003 of $35.9 million on sales of $320.4 million.
The fourth-quarter loss for 2004 is projected to be in the range of $23.1 million to $22.1 million on sales of $40 million to $45 million. The loss for the third quarter of 2004 is expected to be around $3 million to $4 million on sales of $37 million to $40 million.
Barry Aved, president and chief executive officer of the company, said in a statement that the “revised guidance for the second half of the year reflects several factors: First, generally softer-than-expected back-to-school selling has made many retailers more conservative in their positions for the holiday selling season; second, certain of our larger customers also have been faced with internal challenges, which have subsequently caused them to reduce their holiday orders with us, and lastly, significant and increasing congestion of the West Coast ports has caused less predictable delivery times and has resulted in increased cancellations and charge-backs.”
Aved went on to say that, due to the “elimination of quota for next year, a number of retailers have significantly reduced their spring merchandise receipts for the fourth quarter, pushing them into the first quarter of 2005.”
Regarding the anticipated loss for this year, the bulk of it relates to a noncash charge of $22.6 million, which is “expected to be incurred in the fourth quarter, resulting from a reclassification of foreign currency translation adjustments presently recorded on the balance sheet as a reduction of stockholders’ equity,” the company said.
Tarrant explained that, when it liquidated its Mexico business, the funds relating to the currency translation adjustment “will be removed from the separate component of stockholders’ equity and recorded as a loss in the statement of operations.”The projected loss for 2004 also includes a $64.3 million charge from the second quarter relating to $78 million worth of impairments on the appraisal of it fixed assets in Mexico. Excluding these charges, Tarrant expects a loss of $500,000 to a gain of $500,000 in the fourth quarter of 2004 as well as a net loss of $10 million to $12 million for the year.
For 2005, the company projects sales to be in the range of $220 million to $240 million with net income coming in between $7 million and $11 million.
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