WEAK SALES HAMPER DAN RIVER

Byline: David Lipke

NEW YORK — Sinking sales in the apparel fabric division dragged down first-quarter earnings at Dan River Inc. as the textile manufacturer continued in the red for the second consecutive quarter.
For the three months ended March 31, the company posted net losses of $6.5 million, or 30 cents a share, compared to income of $4.1 million, or 18 cents, in the year-ago quarter. The First Call consensus estimate had been for a 20-cent loss.
Apparel fabric sales were $32.2 million for the quarter, down 12.9 percent from the same period last year, and operating losses for the division were $497,000, compared to the year-ago period’s $3.2 million in profits.
In a statement, Joseph Lanier Jr., chairman and chief executive officer of the Danville, Va.-based company, attributed the results to “softness in retail demand for home fashions and apparel products and our efforts to reduce inventories,” which forced the company to sell a “more promotional mix.” Margins were further impacted by plant curtailments and increases in energy and wage costs during the quarter.
The company’s home fashion division increased sales by 5.4 percent, to $120.5 million, but its operating income nose-dived 96 percent, to 485,000. The engineered products division, which makes hosiery yarns and conveyor belt fabrics, saw sales drop 17.3 percent, to $11.3 million, with an operating loss of $398,000.
Net sales for the company as a whole were $164 million, down 0.6 percent from $164.9 million in the year-ago period.
On a conference call, Lanier drew attention to some positive aspects of the quarter, including a $14 million reduction in inventory and a $13 million paring of debt levels. There were 16 days of production downtime during the quarter in order to lower inventory levels, and the company forecasts 12 days of downtime in the second quarter.
Looking ahead, the company expects the apparel division to return to modest profitability in the next quarter on higher sales, as this period is traditionally strong for that division.
Overall, however, Dan River is forecasting operating losses of 10 to 15 cents a share for the quarter, as it remains focused on inventory reduction and expects continued margin pressure.