CHAUS FINISHES QUARTER IN RED
NEW YORK — As expected, a $9 million restructuring charge put Bernard Chaus Inc. in the red again for the first quarter, though gross profit improved slightly.
In the quarter ended Sept. 30, Chaus lost $8.9 million, against a loss of $1.7 million a year earlier. Sales declined 6 percent to $65.4 million from $69.6 million. Of the $9 million charge, $7.2 million was funded by a cash infusion from Josephine Chaus, chairwoman.
The company said the bulk of the restructuring charge was related to the cost of Andrew Grossman signing on as chief executive officer. As reported, Grossman, who joined the firm on Sept. 28, pulled in a $6.2 million sign-on bonus on top of a $1 million base salary for joining Chaus from Jones Apparel Group, where he was president.
Josephine Chaus has been contributing her personal funds to bolster the company, pledging $14.4 million in September alone.
Chaus said the company is reducing costs and maintaining tight control over inventory, as well as working to improve the product. Inventory declined 35.8 percent to $23.9 million from $37.2 million. Cost reductions also included additional layoffs in U.S. and overseas offices. The spokesman declined to specify the number of jobs cut, but said no further layoffs are planned.
One former Chaus employee estimated as much as 30 percent of Chaus’ total work force, including sales and design staff, has been let go since Grossman came on board. The company spokesman said he would neither confirm nor deny that figure. On June 30, Chaus had 797 full-time employees worldwide.
In the quarter, gross profit rose 4.3 percent to $13.7 million from $13.1 million a year earlier.
Analyst Edward Johnson, director, Johnson Redbook Service, said “It was a good quarter in that the company’s continuing earnings were slightly ahead.” However, Johnson noted that the manufacturer is “still not willing to say whether it will be profitable each quarter” going forward.
Johnson said he takes a “wait-and-see” attitude about future profitability. Andrew Grossman’s appointment “looks promising, but it will depend on how the lines do,” said Johnson, referring to new product lines slated for the quarter beginning in July 1995. A spokesman declined to comment on the lines. In a statement, Grossman said, “Our main focus is now and will be on product excellence.”
— Fairchild News Service