CYGNE QUARTER NET UP 86.1%; NEW CUSTOMERS, UNITS CITED

Byline: Thomas Ryan

NEW YORK — The spreading power of private label is reflected in the yearend figures of Cygne Designs Inc., which reported earnings surged 86.1 percent in the fourth quarter and 75.9 percent in the year ended Jan. 28.
While a hefty list of new customers along with two acquisitions made last year are expected to build sales further this year, the results of this private label supplier in 1994 also got a charge from strong sales to an established account, Ann Taylor Stores Corp.
Earnings rose to $4.6 million, or 35 cents, from $2.5 million, or 30 cents, a year earlier. Results topped Wall Street’s average estimate of 33 cents a share. Shares of Cygne Design rose 1 to 10 3/4 Thursday on the over-the-counter market.
The latest quarter includes a $1.1 million charge for the amortization of goodwill related to the acquisition of Fenn, Wright & Manson Inc. in April 1994 and GJM Group in Oct. 1994.
Sales rose to $157.4 million from $62.3 million, reflecting the acquisitions; excluding them, core sales were up 44 percent.
In the year, earnings rose to $10.8 million, or 93 cents, from $6.1 million, or 92 cents. Per-share earnings reflect additional shares outstanding as part of the acquisitions.
Sales jumped to $516.1 million from $220.2 million. Excluding acquisitions, sales were up 61 percent.
Bernard Manuel, chairman and chief executive officer, said the recent acquisitions broadened Cygne’s customer base, extended its product line, and consolidated its position in the private label apparel market.
“Despite the current soft retail environment, which we expect to continue into the first half of 1995, we feel that Cygne Designs is uniquely positioned to take advantage of growth opportunities, particularly with new customers,” Manuel said.
Analysts were particularly impressed with the strength of Cygne’s core apparel business, driven by strong sales of career and casual wear to Ann Taylor. Company officials said in a conference call to analysts that it will be working on the lower-priced Ann Taylor Loft concept. The company also expects to drum up $80 million in business this year from new accounts such as Dillard’s, Target, Structure, Broadway and Disney.
Laurence Leeds Jr., at Buckingham Research, expects earnings to rise 50 percent this year, though he noted that much of the gains will come in the second half due to seasonal patterns of the acquisitions.
Meanwhile, Fenn, Wright, which makes silks, casual sportswear, and sweaters, has been performing below plan partly due to a weak silk market and overexposure to the underperforming Limited Stores chain. Analysts expect added staffing, cost-cutting initiatives, and new business with Structure and Target to lead to improved results at Fenn, Wright in 1995.
In 1993, The Limited Stores chain and Ann Taylor Stores accounted for 85 percent of Cygne’s business. In 1994, Manuel said in a telephone interview, the two chains accounted for 54 percent of the vendor’s business, reflecting its growing list of customers.
The Limited owns about 10 percent of Cygne, while Ann Taylor has formed a joint venture with Cygne to source goods exclusively for Ann Taylor.