FORSTMANN LOSS GROWS AS SALES GAIN IN QUARTER

Byline:

NEW YORK--Caught between rising wool prices and higher interest costs, Forstmann & Co. reported a first-quarter loss that deepened to $2 million from $1.2 million in the year-ago quarter.
Sales, however, were up 16.2 percent to $43.5 million from $37.5 million.
The company said the larger loss reflected a 20 percent increase in wool prices over the year-ago period, a $744,000 increase in interest costs, plus continued weakness in demand for women's coating.
Operating income of $1.5 million in the three months ended Jan. 29 was buried by interest costs of $4.6 million. A year ago, operating income was $2 million and interest costs $3.9 million.
Rod J. Peckham, vice president and treasurer, said the higher interest costs are primarily from increases in rates on the company's floating rate debt.
"Our borrowings are just $1.2 million higher than a year ago, but the floating rate has jumped to 8.96 percent from 6.35 percent." He said that about $88.4 million of Forstmann's $155 million in total debt is subject to floating interest rates that moved up with every hike by the Federal Reserve Board last year.
In a statement, Christopher L. Schaller, chairman and chief executive officer, said that despite the weakness in coating resulting from the unseasonably warm winter, "sales growth was healthy in the first quarter. Importantly, we saw positive results in several areas, including women's wear, men's woolens, Carpini USA and in our converting fabrics."
He added that the impact of higher wool prices would be strongest in the first quarter, but based on the current backlog, higher selling prices should "somewhat mitigate the effects of higher costs beginning in the second quarter."
Higher costs were offset somewhat by lower selling, general and administrative expenses. SG&A in the quarter declined to 11.9 percent of sales from 14.9 percent in last year's quarter. Gross margin, however, slumped to 15.9 percent of sales from 23.4 percent.

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