Denim Can’t Save Burlington Quarter
The recovery in the denim fabric market wasn’t enough to offset the pain Burlington Industries Inc. felt at its wool and synthetic businesses, leading the company to report a 68.5 percent drop in third-quarter earnings.
Despite the return of profitability in the Casual Wear division — which includes denim — net income for the three months ended July 1 was $1.5 million, or 3 cents a share, compared to $4.7 million, or 9 cents, in the 1999 period. Excluding run-out costs from its 1999 restructuring, earnings per share were 5 cents, compared to 19 cents in the prior year’s quarter. Analysts’ estimates for the period were in the 7 to 9 cent range, exclusive of charges.
Net sales dropped 3.4 percent to $419.8 million from $434.6 million in the year-ago quarter.
“We are disappointed by our results this quarter,” said George Henderson 3rd, chairman and chief executive of Burlington, in a statement. “Sales and earnings in our Performance Wear segment fell well below our expectations. This shortfall was largely due to the previously reported weakness in women’s wear and export markets that worsened in the closing weeks of the quarter.”
Volume at the Performance Wear division, which markets apparel fabrics other than denim, declined 6.5 percent to $153.4 million in the period as its operating income dropped 40.3 percent to $7.4 million. Although sales in the Casual Wear unit declined 5.3 percent to $66.1 million, it turned a $4.7 million operating loss in the 1999 quarter into a $1.4 million profit in the most recent period. The interior furnishings unit, the company’s largest, experienced a 3.1 percent increase in sales, to $200.1 million, while its operating income declined 7.6 percent to $19.5 million.
“We are not satisfied with these results and we are moving aggressively to improve our financial performance,” Henderson continued, noting that the outlook for the company’s denim and commercial carpet businesses “continues to be positive over the remainder of the fiscal year.”
Jack Pickler, analyst at Prudential Securities, said, “Like Galey & Lord’s, the results were a shade worse than I thought they would be in the quarter. There’s been some recovery in denim, and I think we’re in a recovery mode that’s going to run for several quarters, although not necessarily several years. Inventories are down in the finished garment pipeline, and improved pricing is the acid test.”
He was less sanguine about the prospects for noncasual fabrics.
“Burlington is in on the leading edge of fabric innovation and promotes those innovations well,” Pickler said, “but the volume in that business has been in dressier apparel, including tailored apparel, and the units consumed in these areas continue to decline. And I don’t think that will stop until we have some sort of major change in lifestyles and attitudes, but at some point, in a fashion business, that has got to bottom out.
“Still, I’m surprised that Performance Wear hasn’t done a bit better as dress casual has begun to catch on,” he noted.
For the nine months, Burlington trimmed its net losses more than 90 percent. The net loss for the period was $3.3 million, or 6 cents a share, compared to a net loss of $35.2 million, or 63 cents, in the comparable 1999 period. Excluding run-out costs, the loss in the 2000 period was 1 cent versus 31 cents for the first nine months of 1999.
Sales for the nine months declined 4.2 percent to $1.19 billion from $1.25 billion. On an operating basis, the Performance Wear unit’s earnings increased 65.4 percent to $21.5 million. Casual Wear registered a $7.9 million operating loss for the nine months compared to a $1.1 million profit during the first nine months of 1999.
Guess.com: A Proud Parent
Guess Inc. this week unveiled the latest arrival in its online retailing efforts, babyguess.com.
The site is connected to guess.com and guesskids.com, where the Los Angeles-based company sells its adult and children’s clothing. Guess launched its e-tailing Web site early last year.
In a statement, Guess co-chairman and co-chief executive officer Paul Marciano said, “We are looking to babyguess.com to be the nation’s access to our product as there are limited retail locations to purchase Baby Guess clothing at this time. This makes babyguess.com an integral part of our online strategy.”
This year, Guess assigned its baby clothing license to Designer Classics, which is now producing the line.
Previously, Baby Guess apparel had been produced by Pour Le Bebe, which also operated a chain of Baby Guess stores, but Guess terminated that license in November 1998. In March, Guess won a $6 million damages award in arbitration after it claimed that its former partner had violated its licensing contracts and not cooperated with Guess in winding down the contracts.
The Baby Guess line is available in three company-owned Baby Guess stores as well as in department stores. The company plans to open about a dozen additional Baby Guess stores through the end of 2001.
The Web site offers an online gift registry and is initially offering free shipping.
An Oddity is Born
After a six-year gestation period, a new denim line, Oddity Jeans, bowed at retail last month.
The line, along with a sportswear sibling, is the product of designer Michelle Knox and her partner, Kristy Winkler. They came up the idea for a clothing line and a logo — a 32-point star — in 1994, around the time Knox graduated from New York’s Pratt Institute, Winkler said.
In the years since, Knox has refined her idea of the line, while Winkler has worked in retail positions in the U.S. and Paris.
In an interview at the company’s recently opened Manhattan showroom, Winkler said the collection aims to be “funky but totally functional. There’s a lot of versatility in the line.”
The versatile touches can run from the predictable — reversible tops — to elements like a hidden zippered pocket at the cuff of a pair of jeans, for clubgoers in need of a safe place to stash some cash.
The jeans line includes a handful of styles, sporting distinctive, curved hip pockets that resemble an upside-down dorsal fin. The jeans assortment is heavy on stretch fabrics, featuring stretch glitter denim, sateen and two prints: a bold version of its logo and a subtle blue plaid-like print. Solid jeans wholesale for $65 and printed ones go for $90.
The line also includes T-shirts and denim tops.
Hot Kiss Expands
Working to build the momentum of its new denim line, which bowed at WWDMAGIC in February, Hot Kiss has hired a separate sales force for its denim product. It’s also planning to introduce a separate advertising campaign next month to promote the denim line.
“We didn’t flash it for just one season and then disappear. We’re taking it very seriously,” explained Moshe Tsabag, president of Hot Kiss. “Every month we’re coming up with novelty ideas.”
In addition to print ads in fashion magazines, the campaign will include posters on billboards and buses in California, Tsabag said.
The company named three sales reps to promote the line across the country. LeeAnn Greco, who previously worked on the former Candie’s jeans, was named East Coast sales rep.; Alina Fattorosi, last with Paris Express/London-London Sportswear, is now West Coast sales rep., and Arthur Drubin, formerly of Lawman Jeans, has been appointed Southeast and Caribbean sales rep.
All three reps report to Tsabag and vice president Ben Kaczor.