NEW YORK — Dragged down by heavy markdowns and lower margins, Norton McNaughton Inc. lost $280,000 in the first quarter ended Feb. 3.
The loss, which came in at 3 cents a share, was slightly worse than average Wall Street estimates of a 2-cent loss. Nevertheless, the stock closed up 1 7/16 to 9 in over-the-counter trading on Friday. In the year-ago quarter, Norton McNaughton earned $1.3 million, or 17 cents. Sales in the latest quarter climbed 22.7 percent to $42.4 million from $34.6 million. Gross margins sank to 23.1 percent of sales from 27.9 percent. The maker of women’s moderate career wear said it expects profits for the full year to be 70 to 80 cents a share. Analysts had been expecting about 86 cents. In the year ended Nov. 4, 1995, the company earned $9.7 million, or $1.20 a share, on sales of $227.5 million.
The company expects increased markdowns in the second quarter, and projects lower earnings, reflecting its plans to close its Kate McNaughton suit line and reorganize its Danielle Paige casual separates division.
Sanford Greenberg, chairman and chief executive officer, said, “Although first-quarter results reflect the effects of a weak and promotional retail environment, we are encouraged by the firming in the retail market that we have experienced in February and March.” He noted that fall merchandise order levels have improved.
Greenberg added, “Unfortunately, the second-quarter results will still reflect the residual effects of a weak calendar fourth quarter for retailers causing allowances to customers to continue to run higher than anticipated.”
In the second quarter last year, the company earned $3.9 million, or 49 cents, on sales of $59.6 million.
He said the company will close the Kate McNaughton division in the second quarter due to its “failure to meet the company’s profitability target” and restructure Danielle Paige to increase its profit margin. “We anticipate that cost-reduction programs and renewed excitement from retailers will result in a strengthening of earnings in the second half of fiscal 1996,” Greenberg said.
As reported in January, the company authorized the repurchase of up to $7.5 million of Norton McNaughton common stock. Since then, Norton McNaughton repurchased about 231,000 shares, or 3 percent of shares outstanding.

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