NAUTICA NET DROPS 26.7% IN QUARTER

Byline: Melanie Kletter

NEW YORK — Hampered by infrastructure and marketing costs related to the Nautica Jeans Co. men’s line and other new businesses, second-quarter profits at Nautica Enterprises dropped 26.7 percent but were in line with Wall Street expectations.
For the quarter ended Aug. 28, earnings dropped to $14 million, or 38 cents a diluted share, from $19.1 million, or 46 cents. Sales grew 10 percent to $166 million from $150.9 million.
Wholesale sales were up 9 percent to $127.1 million, while the retail outlet volume leaped 13.4 percent to $38.9 million, said Don Pennington, chief financial officer. The company now has 81 outlet units.
Nautica in March had guided down estimates for the 2000 fiscal year due to its focus on new business initiatives, including Nautica Sport Tech, men’s and women’s Nautica Jeans, women’s robes and sleepwear and a men’s contemporary sportswear line.
“The launch of new product lines is proceeding as planned,” Harvey Sanders, chairman and chief executive, said in a statement. “We are pleased with the early success at retail of the Nautica Jeans collection and Nautica ladies’ robe and sleepwear products in their opening season this past quarter.”
Sanders said the company will launch its women’s jeans line in January, but said there are no plans for women’s sportswear businesses at this time. However, the firm also told analysts in a conference call that if women’s jeans do well, it “will consider” starting a women’s sportswear line internally.
Last October, Nautica and Bernard Chaus, its women’s sportswear licensee, decided to discontinue the Nautica women’s line because it was unprofitable.
In addition to the women’s denim launch, Nautica also plans to launch a men’s contemporary sportswear business next June.
Leslie McCall, analyst at Brown Bros. Harriman, said she was pleased with the increase in order backlogs, ahead 10 to 15 percent in the quarter. “Investors want to see the other two products hit next year, and right now the company’s investments in new businesses is still great,” McCall said. “Overall, though, the company is on track. They keep plugging away and management sounded more upbeat on the call.”
In the six months, earnings fell 36.6 percent to $18.4 million, or 50 cents a share, from $29 million, or 69 cents. Sales gained 5.1 percent to $275.2 million from $261.9 million. In over-the-counter trading Tuesday, Nautica’s shares closed at 15 1/16, off 11/16.