TEFRON WARNS OF DEEPER LOSSES
Byline: Evan Clark
NEW YORK — Tefron Ltd. said “disappointing” U.S. retail sales would drag down its fourth-quarter losses to between 75 and 80 cents per share — substantially deeper than the 11 cents-a-share loss analysts had been expecting.
The Bnei Brak, Israel-based manufacturer of seamless innerwear’s warning followed earlier guidance that it expected to post a fourth-quarter 2000 loss of about $900,000, or 7 cents a share.
In the fourth quarter of 1999, Tefron earned $3.1 million, or 25 cents a diluted share.
The company said it expects its sales for the quarter ended Dec. 31 to come in even with its reported third-quarter sales, which were $50.1 million. That will be up from sales of $40.8 million reported a year ago.
Investors appeared to be forgiving of the news, as Tefron’s stock closed unchanged Monday at $3 on the New York Stock Exchange. However, that’s a far cry from the stock’s current 52-week high of $20.25.
The poor U.S. retail sales “resulted in a lower backlog, pressure on prices and consequently decreased orders and lowered production levels,” the company said in a statement. Other factors contributing to the shortfall were the complexities of introducing new products into the company’s plants and “the adjustment of inventory figures.”
Cash flow from operations remained positive during the quarter “since most of the loss was noncash related items,” the statement said.
Sigi Rabinowicz, chairman, added in the statement that he was confident about the company’s future.
“We have reviewed our business and assessed what we believe Tefron needs to do in order to return to profitability,” he said. “With our new management team we have spent significant time developing a strategy we believe will lead the company back to profitability and growth.”
However, the company isn’t predicting a quick turnaround. It said that it expects first-quarter 2001 sales to come in between $39 million and $42 million, down from the $60.3 million reported for the first quarter of 2000. It said that the first-quarter losses will likely be half as deep as the fourth-quarter deficit. But that would stand in stark contrast to the earnings of $2.6 million, or 21 cents a share, reported in the comparable quarter.
For the remainder of 2001, the vendor expects growing sales with a return to profitability in the second half.