NORTON MCNAUGHTON NET RISES 22.7 PERCENT IN THIRD QUARTER

NEW YORK--With a 48.1 percent hike in sales, profits at Norton McNaughton Inc. advanced 22.7 percent in the third quarter ended Aug. 4.
Earnings for the three months climbed to $2.2 million, or 28 cents a share, from $1.8 million, or 23 cents, a year ago. Sales rose to $50.8 million from $34.3 million.
"Sales across all product lines have been strong, despite an erratic selling environment for many retailers," Sanford S. Greenberg, chairman and chief executive officer, said in a statement.
In addition to customer acceptance of the products, Greenberg attributed the gains to "our programs to support our sell-through at retail and our ability to deliver our garments ahead of schedule to our retailers."
Jack Pickler, analyst at Prudential Securities, said in a telephone interview that the profits were in line with his estimates, but added that revenues were "quite a bit above" what he expected, reflecting success with Norton McNaughton's new lines and its core business.
He added gross margins were down from the prior year, reflecting heavy promotions primarily at department stores and other retail chains. Gross margins slid to 26.6 percent of sales from 30.9 percent in the year-ago quarter.
Interest expense for the quarter was slightly higher than expected.
In over-the-counter trading Wednesday, shares of Norton McNaughton closed at 20 1/2, down 1/4.
In the latest quarter, the company highlighted internal expansion with the opening of its new Danielle Paige casual separates line and its private label Lauren Alexandra division, which includes traditional separates for Federated Department Stores. In addition to these lines, Norton McNaughton expects that career knitwear separates under the Norton Studio label will contribute to the bottom line early next year. The firm added profits were in line with expectations in spite of expenses to support the new lines and the pricing strategy for the Kate McNaughton line introduced earlier this year.
In the nine months, profits grew 32.1 percent to $7.5 million, or 93 cents, from $5.7 million, or 81 cents, before an extraordinary charge a year ago. After a $401,000 charge for early repayment of debt, earnings were reduced to $5.3 million, or 75 cents, a year ago. Sales gained 29 percent to $145 million from $112.4 million.
Prudential's Pickler said he expects a similar trend in the fourth quarter, with much higher sales and "continued excellent growth" but narrower gross margins as retailers remain promotional. He added McNaughton's Greenberg told analysts that revenues will be substantially higher in the fourth quarter.
For the fourth quarter, Pickler estimates McNaughton will earn 61 cents a share, versus 45 cents last year. In the full year, he expects McNaughton to earn $1.54 against $1.28, before a special charge, a year ago.
In addition to its most recent lines, the firm markets its moderate priced women's career wear under the Norton McNaughton, Maggie McNaughton, Norton McNaughton Petite, Norton McNaughton Wear, Mondiano and Pant-Her lines. --Fairchild News Service

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