CONE MILLS CUTS LOSS TO $10.9M IN QUARTER
GREENSBORO, N.C. — Despite lower denim sales and a $9.7 million pretax restructuring charge for its Mexican affiliate, Cone Mills Corp. narrowed its fourth-quarter loss to $10.9 million from $11.9 million a year ago.
Sales for the three months ended Dec. 29 fell 28.1 percent to $157.7 million from $219.4 million.
In the fourth quarter, the company’s apparel fabrics segment had an operating loss of $1.1 million, excluding special charges, against operating earnings of $7.2 million a year ago. Apparel fabric sales were down 25.7 percent to $127.4 million. Lower denim sales, partially offset by improving specialty sportswear sales, accounted for the decline, Cone said.
While unit sales of denim products continue growing at retail, excessive buildup of inventories at the wholesale and mill levels is resulting in weak near-term sales of denim fabrics by producers, Cone said.
“Even though we have seen some improvement in specialty sportswear markets, and we think the apparel inventory pipeline, excluding denim, is clean, our results will continue to be affected in the short run by curtailed operations as we reduce inventories,” J. Patrick Danahy, president and chief executive officer, said in a statement. “However, as denim inventories return to acceptable levels and home furnishings markets improve, we expect to benefit from higher capacity utilization as well as ongoing cost reduction programs.”
Inventory imbalances in the denim pipeline and weak fashion demand for decorative prints, combined to depress operating results for the full year. For the year, Cone lost $2.3 million, after $5.2 million in pretax restructuring charges.
Excluding the losses of unconsolidated affiliates but including the restructuring, Cone earned $200,000 in the latest year against $13.6 million in earnings a year ago. After losses of unconsolidated affiliates, related primarily with Mexican peso devaluation, Cone reported a net loss of $3.3 million in the year-ago period.
Sales were down 18.1 percent to $745.9 million from $910.2 million a year ago, which included revenues from the Olympic products business, which was sold last January.
Gross profit for the latest year was 14 percent of sales, compared with 13.7 percent a year ago. The increase was mainly the result of the elimination of Olympic, which had low gross profits, Cone said. Selling general and administrative expenses increased to 11.6 percent of sales in 1996 from 9.8 percent of sales a year ago.
Danahy said that excessive inventories in the sportswear fabrics distribution pipeline also hurt the company’s performance in the latest year.
“The company is responding by refocusing on core businesses, becoming more aggressive in marketing, reducing costs and reconfiguring manufacturing operations,” he said.