NEW YORK — Tropical Sportswear International Corp. kicked off 2003 with a first-quarter loss, including charges, and the exit of some of its noncore businesses.
The Tampa, Fla.-based bottoms maker — which owns the Savane, Farah, Bay to Bay, Flyers and The Original Khaki Co. brands, among others — said it would end its licensing agreement with Swiss Army Brands Inc. to produce the Victorinox apparel label and also exit its Duck Head retail outlet business as leases expire.
The financial impact of the firm’s realignment, which helped pull the first quarter into the red, however, should be behind it by the year’s midpoint.
Net losses for the first quarter ended Dec. 28 reached $5 million, or 45 cents a share. This compared with year-ago earnings of $3 million, or 38 cents.
Influencing the most-recent results were a $5.7 million charge for severance and costs related to the departure of William Compton, the company’s former chief executive, and a $1.9 million reduction to previously recorded estimates for severance, relocation and lease termination costs associated with Tropical’s consolidation project. Citing health reasons, Compton resigned as chairman, chief executive and director of the company in November.
Exclusive of special items, the firm managed net income of about $26,000.
Sales for the three months dropped 10 percent to $99 million from $110 million a year ago. Without sales allowances of about $4.3 million related to its Project Synergy consolidation, sales fell 6.1 percent to $103.3 million.
"As anticipated, the operational issues impacted our first quarter and will impact our second quarter as we have and will incur allowances associated with delivery issues," noted Christopher Munday, president and ceo, in a statement.
Going forward, Swiss Army will assume all design, sourcing, sales, marketing and distribution responsibilities for Victorinox. The transition is to be completed in about three months. Victorinox will retain its current officers, including Robert Boland, vice president of sales and marketing; Donrad Duncan, senior director of design, and Sang Lee, senior director of sourcing and manufacturing. A general manager to lead the new division should be appointed shortly.
Tropical, which currently operates 16 Duck Head outlets, anticipates operating no more than eight of the doors by next January."Exiting these businesses will free up valuable resources that can be devoted to our core business," said Munday. He added that, as part of a cost-cutting campaign, Tropical would terminate the leases on its corporate aircraft. While the move will cost $5 million to $6 million, it will result in a $2 million reduction in annual operating expenses.
Due to "increasingly uncertain" conditions at retail, Tropical has also decided to no longer provide guidance on sales or earnings.
Investors traded down shares of the firm 45 cents, or 6.6 percent, to close at $6.42 on the Nasdaq Tuesday.
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