Men’s accessories marketer Swank Inc. nearly tripled its fourth-quarter profits as sales soared 26.2 percent on increased volume with existing retailers and additional business with new accounts, including club retailers.
In the three months ended Dec. 31, the New York-based firm registered net income of $3.6 million, or 63 cents a diluted share, versus year-ago profits of $1.3 million, or 22 cents.
Sales in the quarter rose to $45 million from $35.7 million in the 2009 period, with sales of men’s belts up 37.5 percent. Gross margin improved to 34.2 percent of sales, from 33.9 percent a year ago, as higher sales and lower inventory-related expenses boosted margins while increased royalty expense and lower margins on certain products, most notably belts, hurt them.
“Our business with existing customers — Macy’s, Kohl’s, Penney’s, TJX, Ross and others — really picked up in the fourth quarter,” John Tulin, chairman and chief executive officer of the company, told WWD. “We knew that if we could control our expenses and inventory [at the start of the year] that things would work out. We get aggressive when things get tough. We increased our share of market. Stock-to-sale ratios improved. A lot of things just went right for us.”
Topline results also benefited from Swank’s first shipments to wholesale clubs, including a program with Costco, and the expansion of its belt license with Tommy Hilfiger to include women’s merchandise.
“We and our customers would love to take the position that the consumer has just as much money as he did ‘pre-Lehman,’” Tulin said, “but reality won’t let us do that. In some cases, our AURs [average unit retail prices] came down. The consumer has money to spend, but we realize we’re in competition with gas and chickens and medicines.”
Tulin anticipates upward pressures on prices this year and has seen increases in areas ranging from raw materials to Far Eastern labor. But with the bulk of its business in leather goods and jewelry, “we don’t have the ballooning factor of cotton to deal with. We’re not as affected as the apparel people, but we’re certainly affected.”
For the full year, net income reached $4.2 million, or 74 cents a diluted share, from $1.8 million, or 31 cents, in 2009. The figures for 2010 include a $1.5 million pretax charge resulting from the termination of its strategic alliance with women’s belt resource Style 365 LLC. Sales grew 15.6 percent to $132.7 million from $114.8 million in 2009.