NEW YORK — Things got a little bumpy for Kellwood Co. in the third quarter ended Jan. 31.
Citing accounting charges for acquisitions, special losses, and consolidation costs, the firm posted a loss of $2 million in the three months and said fourth-quarter earnings would also be under pressure.
In the year-ago quarter, the diversified apparel manufacturer earned $3.5 million, or 17 cents a share.
Sales climbed 15.9 percent to $291.5 million from $251.6 million.
William J. McKenna, chairman and chief executive officer, said that the red ink reflected “charges booked in the third quarter attendant with the accounting for recent acquisitions, loss on the sale of the Home Fashions division, and costs incurred in the consolidation and repositioning of certain underperforming domestic divisions in addition to intense margin pressure.”
The firm had stated in December that it would take a charge of $1.05 million, or 5 cents a share, on the sale of the home goods division, but at the time gave no forecasts of other special costs. A company spokeswoman declined to break out the charges for the quarter and nine months. As reported, junior lines have been a problem area for the firm.
Wall Street did not seem overly surprised, however. Kellwood’s stock fell 1/4 to close at 17 3/4 Thursday on the New York Stock Exchange.
The company’s most recent acquisitions include David Dart Inc., which designs a women’s sportswear and dresses, and Halmode Apparel Inc., a New York-based maker of branded and private label dresses and other women’s apparel.
In the nine months, Kellwood’s profits fell 17.9 percent to $19.8 million, or 94 cents, from $24.1 million, or $1.16, a year ago. Sales rose 8.6 percent to $968.5 million from $892.1 million.
Inventories as of Jan. 31 were up 28.9 percent to $253.9 million against a year ago.
Going forward, McKenna said, earnings will continue to be hurt in the fourth quarter due to the consolidation of domestic divisions initiated in the latest quarter, continued margin pressure, and the company’s decision to close its Smart Shirt plant in Saipan. The company said it will take a $14 million after-tax charge against fourth-quarter earnings to close the Saipan plant by fall 1995. In the fourth quarter ended April 30, 1994, Kellwood earned $11.5 million, or 55 cents, on sales of $310.9 million.
While the Saipan plant was initially set up for long-run basic shirt products, the company said that these products are currently “in weak demand and at very low margins in the market place.” The situation was made worse by labor shortages and actual and expected minimum wage increases. “The recent decisions and actions have taken their toll on results for the current quarter and fiscal year — but will better position Kellwood in the year ahead and beyond,” McKenna said. — Fairchild News Service