CANDIE’S REPORTS DEEPER LOSSES
Byline: Jennifer Weitzman
NEW YORK — Candie’s Inc. Monday reported dismal fourth-quarter and yearend results, including steep declines in revenue and a widening of its losses.
In the quarter ended Jan. 31, the footwear and accessories marketer was hit with a loss of $15.2 million, or 84 cents a share, versus a loss of $2.0 million, or 11 cents a share, a year earlier. Revenues fell 40.5 percent to $14.3 million, from $24.1 million.
The Purchase, N.Y.-based company blamed a slowdown in women’s footwear sales for its poor performance. Other problems stemmed from promotional pricing to clear excess inventory, higher expenses from new initiatives, depreciation expense related to acquisitions and a settlement of class-action litigation, the company said.
Neil Cole, chairman and chief executive officer, said he is confident that changes in the company as well as improvements in women’s shoe sales will help reverse last year’s disappointing results. The company, which also owns Bongo jeans, had recently made changes to its management team, operating and financial procedures and product line.
Looking ahead, Cole said the company has begun a new set of initiatives that it hopes will lend itself to further growth and build Candie’s into a lifestyle brand. Plans include expanding Candie’s footwear lines, licensing and consumer-direct business. Other developments involve focusing on gross margin improvement and streamlining operations to reduce costs.
For the year, it reported a loss of $25.2 million, or $1.41 per share, compared to losses of $641,000, or 4 cents a share, a year earlier. In addition, the company reported a 20.8 percent drop in revenues to $90.8 million from $114.7 million.
One positive note for Candie’s was an eight-fold increase in licensing income for the year, to $3 million from $373,000 a year ago, due to its licensing agreement with Liz Claiborne to market fragrance and cosmetics products bearing the Candie’s brand. The company said it plans on building on its successful relationship with Liz Claiborne by looking for additional licensing opportunities in related categories.
Cole said, “As evidenced by our licensing income growth, the Candie’s brand continues to gain strength with our target market.” He said Candie’s fragrance performed well above expectations and has improved the company’s brand visibility.
Cole said he also sees growth opportunities in its Web site, which was launched last November. Candie’s said it would like the site to become a teen portal destination site. Candie’s said it plans to open as many as five retail stores this year. It now operates seven.
Lee Backus, senior vice president with Buckingham Research, said because Candie’s cleaned house during the past year, he was not surprised by its results. But he quickly added that he expects it to bounce back this year.
“Neil seems to be focusing on getting the company straightened out and making money,” Backus said. “Certainly, the worst is behind them.”
Backus said Candie’s has boosted initial markups and that its junior merchandise is selling well.