NAUTICA’S PROFIT RISES 31.7% IN 2ND QUARTER
NEW YORK — Predicting continued growth, Nautica Enterprises Inc. said second-quarter net profit rose 31.7 percent to $14.9 million, or 36 cents a share, beating Wall Street estimates of 33 cents. A year ago, the firm earned $11.3 million, or 26 cents.
Asked how the firm’s women’s apparel line, produced under license by Bernard Chaus Inc., was doing, Don Pennington, Nautica’s chief financial officer, said the business is “continuing to build and is gaining momentum for the future.”
Pennington noted Nautica’s fragrance business is continuing to perform well, with strong sales of Nautica Woman and Nautica Competition.
The company’s two newest licensed product rollouts, Marine Denim and the home collection, which were just launched, are exceeding expectations, Pennington added.
Nautica stock closed Tuesday at 29, up 1 1/4, in over-the-counter trading.
Sales for the three months ended Aug. 31 gained 27.9 percent to $132.5 million from $103.3 million. Gross margins increased to 46.4 percent of sales, compared with 45.5 percent.
Selling general and administrative expenses were 29.2 percent of sales, compared with 28.6 percent last year. In a research note issued Tuesday, Allison Malkin, apparel analyst at SBC Warburg Dillon Read, said the increase was due to higher marketing expenses associated with Nautica Competition.
Malkin also said royalty income rose 37 percent, and included solid gains in fragrance, footwear, boys’ wear and international wholesale. She made no mention of the women’s line.
“We expect strong earnings to continue into the third quarter,” Malkin said. “In fact, holiday backlog is up over 25 percent. SG&A [selling, general and administrative] should rise as a percent of sales, as advertising expense is projected to rise.”
For the six months, earnings jumped 34.8 percent to $22.6 million, or 54 cents, from $16.7 million, or 39 cents. Sales increased 27.1 percent to $228.1 million from $179.5 million.
Harvey Sanders, chairman and chief executive, noted in a statement, “The demand for Nautica products continues to grow.”
“The company is on target with growth plans and the outlook for the year is excellent,” Sanders said.
Malkin said she expects Nautica to earn 46 cents a share in the third quarter, versus 37 cents in the prior year. For the full year, she expects earnings of $1.31, compared with $1.02 last year.
For fiscal 1998, Malkin projects a firm sales increase of 24.3 percent, based on increases at existing stores, 130 new in-store shops and 130 expansions, and the addition of seven outlets.