NEW YORK — A $32 million litigation charge pulled The Dress Barn into the red in its fourth quarter.
The Suffern, N.Y.-based specialty retailer, which offers value-priced casual and career apparel at 772 stores, recorded a loss of $8 million, or 27 cents a diluted share, for the three months ended July 26. Excluding the negative impact of a jury verdict of $30 million in compensatory damages and $2 million in expenses, quarterly earnings would have been $12.5 million, or 42 cents, favorably impacted by an 8 million share Dutch Auction tender offer completed during the year. Last year, the retailer reported profits of $13.4 million, or 36 cents.
Sales for the quarter inched up 0.8 percent to $188.1 million over sales of $186.7 million, but fell 2 percent on a same-store basis.
David Jaffe, president, chief executive and director, said on a conference call the company continues to strongly believe there is no merit to the jury award and is “vigorously pursuing an appeal.”
As reported, Alan Glazer, the former chairman and chief executive officer of Bedford Fair Industries, a women’s apparel catalog house, filed a lawsuit in a Connecticut state court accusing The Dress Barn of “unfair trade practices” regarding negotiations to acquire the Bedford Fair catalog business before it filed for Chapter 11 several years ago, according to a regulatory filing. Bedford Fair was later acquired by Fingerhut Cos.
In explaining the disappointing performance in the quarter, Jaffe said “The economic environment that we faced was still weak at the beginning of the quarter and we saw only modest improvement coupled with an unseasonable and wet spring. We felt the highly promotional environment as many of the apparel retailers marked down goods to move spring inventory.”
Jaffe said while units per transaction continue to increase, “the major problem we are facing, however, is that sales transactions are down significantly. We are getting less customer traffic in the store.”
He outlined three strategies to bring existing customers back and attract new ones, including the delivery of differentiated, quality merchandise at value prices; a focus on marketing to communicate the brand and promotions, and the provision of friendly service in a convenient shopping environment.
Keith Fulsher, general merchandise manager said other merchandise initiatives are upgrading the quality of the fabric while maintaining the quality, speeding up the supply chain and building sales in jewelry and accessories.
For the full year, profits sank 78.8 percent to $8 million, or 25 cents a diluted share, compared with 2002 earnings of $37.9 million, or $1.01. Excluding the litigation charge, year-end income would have been $28.5 million, or 89 cents a share. The Dutch Auction tender offer boosted earnings per share 5 cents. Sales in 2003 withered 1.4 percent to $707.1 million from $717.1 million
Fulsher said in a telephone interview that, while still early in the fall season, he is encouraged by the pace of DB’s sweater business this quarter and that blouse business has continued to be a strong performer so far.