TARRANT: MARGINS WILL SHRINK 14% IN SECOND HALF
LOS ANGELES — Tarrant Apparel Group said it expects gross margins to narrow to 14 percent in the third and fourth quarters as a result of the expansion of its retail customer base, diversification of its sourcing and a rise in Hong Kong quota prices.
The private label apparel maker’s gross margins were 16.4 percent in the 1996 third quarter and 16 percent in the fourth quarter.
The firm said the decline will be offset in part by a decrease in overhead and higher-than-expected nonoperating income.
In the year-ago third quarter, Tarrant earned $2.2 million, or 34 cents a share, on sales of $50 million. In the fourth quarter, earnings were $2.7 million, or 41 cents a share, on sales of $68.9 million.
Before the announcement, Wall Street’s estimates called for 49 cents a share in the third quarter and 50 cents in the fourth quarter. The news came out after the market closed Friday.
On Monday, the stock dropped 1 1/4 to close at 13 1/2, and on Tuesday, it closed at 13, down 1/2.