DESIGNER HOLDINGS’ NET UP 13.5% IN QUARTER
NEW YORK — With the help of 3 cents a share in reimbursed expenses from the collapsed license deal with Donna Karan International, first-quarter profits at Designer Holdings Ltd. moved ahead of a year ago, growing 13.5 percent to $7.4 million, or 23 cents a share.
In the year-ago quarter, Designer Holdings earned $6.6 million, or 27 cents on fewer shares.
Excluding the nonrecurring gain of $1.76 million, or 3 cents, earnings per share in the latest quarter came in 1 cent better than average Wall Street estimates of 19 cents, and the firm’s stock rose 1/8 to 7 3/4 Tuesday on the New York Stock Exchange.
In addition to the money returned from Donna Karan, the company benefited from significantly lower interest expense in the latest quarter. Interest expenses declined to $778,000 in the quarter from $4.5 million a year ago.
Revenues in the quarter ended March 31 rose 6.9 percent to $122.5 million from $114.6 million.
Excluding $1.33 million of sales to Calvin Klein Outlet stores, sales of women’s and petites gained 12.9 percent to $29.3 million from $26 million. Juniors edged up 2.4 percent to $42.4 million from $41.4 million. However, sales in the men’s division fell 7.7 percent to $41.6 million from $45 million a year ago.
Royalties shot up to $1.8 million from $642,000 a year ago.
Gross margins improved slightly to 38.3 percent of sales from 38.2 percent a year ago, but selling, general and administrative expenses jumped to 27.4 percent of sales from 23.7 percent.
Discussing the Calvin Klein jeanswear business, Arnold Simon, president and chief executive officer, said in a statement, “We benefited from increased sales from our new shop-in-shops, which were installed in the second half of 1996; the addition of the Calvin Klein outlet stores, which were acquired in November 1996, and the strong performance of the CK/Calvin Klein Khakis line.”
He further noted the firm “is guided by a two-pronged strategy, which involves seeking new avenues of growth for the Calvin Klein business while aggressively pursuing new acquisitions and licensing opportunities.”
Designer Holdings also said that it received a commitment letter from Nationsbank for a $200 million revolving credit facility. The credit facility is designed to lower interest costs and provides funding of $150 million over five years that can be used for new acquisitions, the company said.
Analysts advised to look for new developments from the company.
Walter Loeb of Loeb Associates said, “Designer Holdings is on the threshold of some new announcements. They are working on something to offset the disappointment of the Donna Karan deal.”
Laurence Leeds Jr., managing director at Buckingham Research, said, “Knowing [Arnold Simon], they are thoroughly exploring some opportunities.”