DESIGNS PROFIT SLIPS 1.6% FOR 3RD QUARTER
CHESTNUT HILL, Mass. — Although women’s jeans continued to do well and men’s and women’s shirtings made a strong showing, third-quarter profits at Designs Inc. slid 1.6 percent while sales rose 9.8 percent.
The retail management company, which until recently sold only Levi Strauss & Co. apparel and accessories, earned $6.7 million in the latest quarter ended Oct. 29, against $6.8 million a year ago. Earnings per share were flat at 42 cents.
Sales grew to $80.8 million from $73.5 million, but same-store sales declined 7 percent.
The company noted that it maintained gross margins in the latest quarter at 33.5 percent. An increase in business from higher-margin Levi’s Outlets and Original Levi’s Stores offset lower initial merchandise markups and price competition in the mall-based stores.
Selling, general and administrative expenses for the quarter increased to 17.7 percent from 16.4 percent. The jump reflected higher payroll expenses and increased advertising and health-care costs.
Joel H. Reichman, president and chief operating officer, said sales of Dockers are stable, adding, “Sales of wrinkle-free won’t really take shape until spring.”
In the nine months, earnings were down 9.7 percent to $8.4 million, or 53 cents, from $9.3 million, or 56 cents, before an accounting gain in the year-ago period. After a $79,000 accounting gain, earnings in 1993 grew to $9.3 million, or 57 cents.
Sales gained 10.2 percent, to $186.1 million from $168.8 million, while same-store sales were down 5 percent.
The company closed one Designs store in the latest quarter and is planning to close up to four more stores during the year. Designs, which operates 126 stores under various formats, expects costs related to the closings to total $4.6 million for lease obligations and employee relocation and termination expenses. In addition, the company will take noncash charges of $2 million related to inventory markdowns and fixed assets disposals.
The store-closing costs will be charged against the previously set $15 million restructuring reserve. Designs said it did not expect the closings to hurt earnings in the fiscal year, but estimated minimal savings in fiscal 1995, and savings of $750,000 in fiscal 1996.
Designs closed Wednesday at 9 3/8, down 1/8 in over-the-counter trading.
— Fairchild News Service