NEW YORK--Hit by lower than expected margins and citing the weak state of women's apparel retailing, private label supplier Cygne Designs Inc., as expected, reported a net loss of $4.7 million in the first quarter ended April 29.
The loss came to 36 cents a share, reaching the steeper end of Cygne's projection on April 28 of a loss between 31 cents to 36 cents a share.
In the first quarter of 1994, Cygne earned $1.7 million, or 19 cents a share. Sales climbed 62.1 percent to $128.4 million from $79.2 million, reflecting the acquisition of Fenn, Wright & Manson in April 1994 and GJM in October 1994. Assuming the two acquisitions occurred on Jan. 30, 1994, earnings would have been $229,000, or 2 cents a share, in the year-ago quarter on sales of $117.2 million, according to Cygne.
The loss in the latest quarter reflected a normal seasonal loss by GJM, an intimate apparel business, and lower than expected sales and substantially lower than expected margins at certain other divisions, particularly due to a weak environment for women's apparel. FWM was also hurt by a poor performance from its Hong Kong product sourcing office. The loss also reflects a $1.1 million pretax charge related to write-off accounts receivable stemming from the Chapter 11 of The Icing Inc., an apparel and accessories retailer, in early May.
The quarter included a $4.7 million gain on the sale of FWM's UK branded business. The gain is net of a $2.8 million charge to integrate FWM's operations into Cygne's in both New York and Hong Kong.
Bernard Manuel, chairman and chief executive officer, said, "Although we see no quick end to the weakness in retail sales of women's apparel, we remain confident that we offer our customers strong design, merchandising, and manufacturing performance, and we believe Cygne Designs is well positioned to take advantage of growth opportunities as the retail environment improves."
"I'm positive on the company," said David Frankel, an analyst at PaineWebber. "Clearly they have some problems in the second quarter at Fenn Wright & Manson to work through, but the third quarter should see a significant return to profitability."
In over-the-counter trading, Cygne's stock closed at 5 1/2, up 1/4.
Cygne's major accounts are Ann Taylor, Limited Stores and Express. It also sells to such accounts such as Lane Bryant, Lerner, Victoria's Secret Stores, Casual Corner and American Eagle Outfitters, as well as several department stores. The Limited owns about 10 percent of Cygne, while Ann Taylor has formed a joint venture with Cygne to source goods exclusively for Ann Taylor. --Fairchild News Service

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