LESLIE FAY SEES BIG LOSS FOR YEAR
NEW YORK — The Leslie Fay Cos. reported Tuesday that operating profits fell 22.2 percent in the third quarter ended Oct. 1, while reorganization charges drove the bottom line deeply into the red. Revising its financial forecast for 1994 downward for the third time, the firm said it now expects to report “a substantial operating loss” for the year.
The lackluster start to fall retail business would constrict revenue in the fourth quarter, the firm said.
The company, which has been reorganizing under Chapter 11 since April 1993, did not say how deep the year’s loss would go but said it would not be as bad as last year’s $32.6 million operating loss.
Executives had originally forecast a $16 million profit in 1994 but in late September trimmed that estimate, first to roughly $6 million and then to around $2 million to $3 million.
In the third quarter, Leslie Fay’s operating profits slipped to $1.4 million from $1.8 million last year. Charges related to the reorganization, including a $10 million expense for closing its Theo Miles division, resulted in a net loss of $17.6 million. Last year, the company posted a net loss of $8.4 million.
Sales in the period dropped 14.8 percent to $171 million from $200.7 million.
Leslie Fay attributed the drop in sales, in part, to the ILGWU strike at its Pennsylvania manufacturing and distribution facilities. The strike, which lasted from June 1 until July 15, forced late deliveries, which resulted in increased markdowns and customer allowances.
Throughout the strike, Leslie Fay had maintained that it had taken precautions in the event of a strike, like shifting production to 807 countries, and had not been affected by the shutdown.
With sales off in the quarter and expected to ease further in the fourth quarter, Leslie Fay said it is continuing its overhead reduction program, which is aimed at reducing payroll, rent and other occupancy costs.
A the end of the quarter, the company had not touched its $100 million DIP credit agreement and had $16.9 million in cash on hand.
“We believe the strike-related problems that curtailed sales and profitability in 1994 will have worked their way through the pipeline by the end of the fourth quarter and will be behind us as we begin shipping for the spring season,” Michael J. Babcock, president and chief operating officer, said in a statement.
Said John J. Pomerantz, chairman and chief executive, in the statement: “While market conditions remain tough, we feel we have a solid merchandise lineup for spring and look forward to a better year.”
— Fairchild News Service