CHAUS SHRINKS LOSS, GETS $81M FINANCING
Byline: Thomas J. Ryan
NEW YORK — Bernard Chaus Inc. reported a loss of $9.3 million in the fourth quarter ended June 30, and conceded that its Nautica women’s line has been a disappointment so far.
On the brighter side, the company said it secured a new bank agreement for up to $81 million in borrowings.
The loss includes a $2.3 million restructuring charge to close its outlet store business and to cover professional fees related to a debt refinancing. The quarter also included a $1.1 million charge to liquidate its outlet stores. In the 1996 quarter, Chaus lost $10.7 million.
Sales slid 5 percent to $31.1 million from $32.7 million.
In the full year, Chaus’ losses narrowed to $16.5 million from $24.4 million. Sales slid 6.1 percent to $160.1 million from $170.6 million.
Chaus’s new financing with BNY Financial Corp. (BNYF) includes another big cash infusion by Josephine Chaus, chairwoman, co-founder and principal shareholder.
Chaus’s just-released 10K said a reduction in off-price sales and the exit from dresses last year reduced sales in the year, but lifted gross margins to 21.7 percent of sales from 13.2 percent in 1996.
The dress division had a negative gross margin of $2.2 million in 1996.
Selling, general and administrative expenses increased to 25.6 percent of sales from 23.5 percent as a result of the launch of the licensed Nautica line in August 1996.
Nautica, launched for fall 1996, did $25 million in sales in the year, and Chaus’s 10K noted that in view of the “disappointing performance” of Nautica to date, Chaus is searching for a new executive officer to manage the line, and plans a relaunch with a narrow focus on casual sportswear.
Chaus said this is more consistent with Nautica men’s line. The former launch included both career and casual sportswear.
Chaus plans to spend $1 million for in-store fixtures and signs for the Nautica line. Chaus spent $400,000 last year in setting up 120 Nautica in-store shops.
Meanwhile, Chaus’s career apparel lines dropped 11 percent to about $87 million as declines in Chaus misses’ and large size lines offset a pickup at in petites.
Chaus’s weekend sportswear line fell 14.7 percent to $48 million.
Chaus had 22 outlet stores as of June 30, but must close them all by January 1998 or it will default under the new financing agreement, the 10K noted.
On the positive side was Chaus’s backlog, which stood at $92 million as of Oct. 13 versus $45 million a year earlier.
Dillard’s Department Stores accounted for 33 percent of sales last year; The May Department Stores and Federated Department Stores, both 16 percent; and TJX Cos., 6 percent.
In the obtaining the new financing, the chairwoman has agreed to provide $12.5 million in cash collateral to pay off the old bank loan with BNYF.
Josephine Chaus has also committed to spend up to $12.5 million buying stock in a rights offering.
Also, as an inducement to BNYF, the chairwoman agreed to purchase at the option of BNYF, a $2.5 million junior participation in the new financing agreement in the event of a default.
The new financing consists of a $66 million revolving credit line and $15 million term loan facility. The old agreement provided borrowings of up to $72 million.
As reported, the chairwoman has agreed to exchange $40.5 million in debt owed to her for equity in the firm.
Currently, she owns 57 percent of the firm. She will increase her stockholdings to between 69.5 percent and 94 percent depending on number of rights exercised by other stockholders in the offering.
The company plans to offer shareholders rights to buy 10 million shares at $2 each.
Shares of Chaus closed Friday at 3/4 , off 1/16, on the New York Stock Exchange. The restructuring also proposes a 1-for-10 reverse stock split.
The debt-for-equity swap and rights offering are expected to be completed by Jan. 15, 1998.