Hampshire Group Ltd. saw fourth-quarter losses climb as it dealt with a real estate issue at the company’s New York headquarters while it registered progress on the top line from recent additions to the business.
For the three months ended Dec. 31, the net loss mounted to $6.3 million, or 94 cents a share, from the year-ago loss of $131,000, or 2 cents. The company reported a $6.3 million “loss on lease” in the quarter without which the firm would have registered a small profit, whereas the year-ago loss would have been larger without a lease-related benefit that reduced selling, general and administrative costs. Gross profit, which includes no impact from lease considerations, more than doubled to $8.2 million from $3.5 million as gross margin rose 420 basis points to 18 percent of sales from 13.8 percent.
Lifted by the acquisition of Rio Garment in August, sales rose 82 percent to $45.7 million from $25.1 million in the final quarter of 2010. For the full year, sales rose 50.3 percent to $86.1 million from $57.3 million, with Rio contributing $29.2 million, or 34 percent of the 2011 total, during its more than four months under the Hampshire umbrella.
“Last year was a year of transformation,” said Heath Golden, president and chief executive officer of Hampshire, of the Rio acquisition, the continuing rollout of the upscale Scott James brand acquired in 2010 and the expansion of its Dockers license to include all men’s tops. “This will be a year of transition and we hope that next year will be when we prove the validity of our business model. The reality is that the business is already far less seasonable than it used to be.”
Hampshire’s sales in the first six months of the year, all prior to the Rio purchase, were $7 million, just over 8 percent of the total for the year.
Hampshire remains a major supplier of men’s sweaters but sold its women’s business to Li & Fung last May. The firm continues to make and market Geoffrey Beene and Dockers men’s sweaters, but its license for Alexander Julian has expired and the Joe Joseph Abboud license will expire at the end of the current year.
Golden told WWD that the Rio acquisition has not only given the company substantial business in the specialty retail channel that it didn’t have previously, but has also opened up attractive opportunities for “cross-selling.”
“We didn’t have any business with Aéropostale before we acquired Rio, but now they’re our largest customer and we’ve started selling sweaters to them,” he said. “Scott James is the smallest piece of our business, but it’s having a halo effect and giving us a lot more direct-to-consumer and international potential.”
He reported that Scott James is currently in six Bloomingdale’s units and expects to be in nine by the end of the year. In developing its business for the brand with independent stores, Hampshire is about to open a 500-square-foot Scott James shop at Shaia’s, the Birmingham, Ala., specialty store. “We’re already in Canada with the brand and we’re in discussions with other markets,” he said.
Hampshire said that it has been vacated from two of the five floors in its offices at 114 West 41st Street in New York and recorded the “loss on lease” expense to reflect lease costs that were incurred “without economic benefit.” Golden said that the company and its New York landlord will be facing off in New York City civil court regarding a series of charges related to the lease conflict and the landlord’s foreclosure. The actions are currently in the process of discovery proceedings.
For the full year, Hampshire’s net loss grew to $10 million, or $1.67 a diluted share, from a loss of $9.7 million, or $1.74, in 2010.