LESLIE FAY CITES COSTS, REPORTS 27.9% NET FALL ON 9.5% SALES RISE

NEW YORK — Stymied by price erosion and higher costs in its namesake dress category, profits at The Leslie Fay Cos. slumped 27.9 percent in the first quarter ended April 1 to $3.3 million, or 60 cents a share, from $4.3 million, or 70 cents, a year ago.
Sales gained 9.5 percent to $66.9 million from $61.1 million. Excluding sales of $6.2 million from its new license for Liz Claiborne dresses, sales fell $400,000.
Dress sales rose 4.2 percent to $45.7 million as a 39.5 percent gain in its Warren brands division, acquired in the 1998 fourth quarter, offset a 7.1 percent drop in Leslie Fay brands.
Sportswear sales fell 12.6 percent to $15.3 million as a result of the planned integration of Leslie Fay Sportswear and Leslie Fay Haberdashery product lines in a move expected to improve profitability.
“In the first quarter, we did experience lower margins in the company’s dress lines as a result of higher discounting and inventory clearance,” said John J. Pomerantz, chairman and chief executive. “We expect these margins to improve during the year.”
Pomerantz noted that the integration of sportswear operations is on track and that customers had responded well to the Claiborne license. He noted that a licensing deal for Cynthia Steffe contemporary dress and sportswear was recently made final.
Gross margins eroded to 23.4 percent of sales from 27.3 percent because of increased price concessions on early spring and resort lines as well as lower markups attributable to more domestic manufacturing.
Selling, general and administrative expenses were trimmed to 15.8 percent of sales from 17 percent.
Leslie Fay noted that earnings before interest, taxes, depreciation and amortization slid 19.4 percent to $5.4 million from $6.7 million.