Hampshire Group Ltd. on Monday posted losses on sharply lower sales for both the fourth quarter and full year, but laid the groundwork for what it hopes will be an improved 2011.
For the quarter ended Dec. 31, the loss was $131,000, or 2 cents a diluted share, against income of $10.7 million, or $1.81, in the year-ago period. Sales dropped 27.6 percent to $46.5 million from $64.3 million. Gross margin fell back to 17.2 percent of sales from 26.7 percent in the final quarter of 2009.
Heath L. Golden, president and chief executive officer, said, “Operating results in 2010 were adversely affected by a highly promotional environment and a shift in our customers’ focus towards their private and exclusive brands.”
The ceo said the company expects that the inflation the industry is experiencing in raw materials, labor and transportation to “continue for the foreseeable future.”
To counter those issues, Golden said the apparel firm is broadening its customer base, expanding its sales channels and reducing operating costs, as well as eliminating non-operational costs incurred over the last few years. He pointed to the acquisition of Scott James in the second quarter as a “first step in our efforts to expand our sales channels and attract new customers.”
For the year, the loss widened to $9.7 million, or $1.74 a diluted share, from 2009’s loss of $6 million, or $1.11. Sales dropped 18.6 percent to $134.5 million from $165.2 million.
The company said a restructuring and cost reduction initiative in 2010 allowed it to reduce selling, general and administrative costs by 15.6 percent to $33.5 million from $39.7 million in 2009. In addition, it ended the year with a balance sheet including $51.9 million in working capital, $36.4 million in cash, and no borrowings outstanding under its credit facility. Finally, the costs connected with the litigation from its 2006 audit committee investigation have been settled, eliminating any related costs going forward.
On Monday, Hampshire shares were down 10 cents, or 2.6 percent, to $3.80 in over-the-counter trading.