CHAUS POSTS NET DROP OF 90%, FORESEES LOSS IN 4TH QUARTER

Byline: Thomas J. Ryan

NEW YORK — Citing a highly promotional department store climate, Bernard Chaus reported that earnings tumbled 90.1 percent in the third quarter ended March 31 and forecast a loss for its fourth quarter.
But the better sportswear maker also announced the hiring of Stephanie Seymour as its spokesmodel, and said that moves to dramatically reduce stockkeeping units, cut price points and launch in-store shops should lift fall results.
Earnings in the three months fell to $425,000, or 2 cents a share, from $4.3 million, or 16 cents, a year ago. Sales dipped 1 percent to $51.6 million from $52.1 million, and higher markdowns depressed gross margins to 20.8 percent of sales from 27.7 percent.
“Retailers have become increasingly reliant on promotions to drive traffic and sales volume, and these trends have impacted our industry,” said Josephine Chaus, chairwoman and chief executive, in a conference call.
“While unit sales have increased and our new lines have been well received, our sales have been flat to somewhat lower. We are disappointed in these results, but at the same time we believe it is important for our long-term relationship to proactively support our customers through this difficult period in women’s apparel.”
Ivy Karkut, president, said the Chaus line will be reduced by 40 percent for this fall and be grouped around distinct themes in order to bring “a more cohesive and impactful presentation at retail that we believe will be more enticing for customers.” The line will also carry a “more modern orientation” with an aim for “a more contemporary approach to career dressing.”
In addition, Chaus is “lowering starting price points on various products across the line while remaining firmly within the better department,” Karkut said.
Key items in each group will be introduced “at incredibly sharp price points” to compete with the stores’ private label programs and “serve as a catalyst for greater sales across all the Josephine Chaus lines.”
At least 50 in-store shops featuring the Seymour campaign will be in place for fall, and another 100-to-150 doors will feature a “visual package” of the campaign, which will hit stores in late summer, Karkut said. Chaus is considering print or billboards featuring Seymour this fall, but no decisions have been made.
The firm also said it was “modeling” other successful apparel and cosmetics companies through the recent hiring of two retail analysts to gauge inventories and sell-throughs door by door.
Chaus in the late Nineties successfully repositioned its brand from a moderate to a better sportswear line, and last spring launched Josephine Chaus Essentials, a better sportswear separates line, and Josephine Chaus Studio, a line of business casual attire, with the aim of building Chaus into a lifestyle brand. But the firm began experiencing markdown pressures this past holiday.
Nonetheless, the firm said continued pressure on margins and the lower prices will lead to a fourth-quarter loss, although the firm expects to be profitable for the full year.
“While the steps we are taking will have a near-term financial impact, we are confident this is the right course for the long-term success of the Josephine Chaus brand,” the ceo said.
In the nine months, earnings slumped 35.6 percent to $5.4 million, or 20 cents a share, from $8.3 million, or 31 cents, a year ago. Sales inched 1.2 percent to $148.3 million.