NAUTICA NET DIPS 4.4 PERCENT

Byline: Thomas J. Ryan

NEW YORK — Nautica Enterprises said markdown pressures pushed profits down 4.4 percent in the second quarter, but the launches of men’s jeans and the John Varvatos contemporary line are exceeding expectations.
Women’s jeans, launched at the end of July in 165 department stores and 150 specialty stores, had a “mixed” performance. “We feel good about the product, but it’s mixed. Some accounts were very good, others not as good,” said Harvey Sanders, president and chief executive, in a conference call.
In the quarter ended Sept. 2, earnings slid to $13.4 million from $14 million, though earnings per share rose to 41 cents from 38 cents due to a stock buyback program. Sales advanced 11.3 percent to $169.4 million from $152.2 million.
Summer markdowns on Nautica’s core sportswear lines pressured gross margins, while a number of launches increased operating costs, Sanders said.
Nautica released its results after the close of the market Wednesday. Earlier, its shares closed up 44 cents to $12.19 in Nasdaq trading. Its 52-week range is $8.38 to $16.25.
Men’s jeans, launched for fall in 750 doors “continues to perform exceptionally,” and is now in 1,000 doors. John Varvatos, launched last fall at Barneys, Saks Fifth Avenue and Bergdorf Goodman “has been nothing short of spectacular” with high single-digit weekly sell-throughs. Nautica’s men’s and women’s sleepwear, launched fall 1999, also beat plan.
Sanders blamed the poor showing in women’s jeans at some accounts on “execution,” either those retailers were late in getting the product on the floor or employing minimal signage and presentation. Sanders noted that the women’s line was launched at a time when status denim “was sliding down” and the line was sold at regular-price points despite the “high promotions” in that department.
“We look for ladies’ to be a growth vehicle for us in the future, yet probably not as quickly as our men’s jeans business,” said Sanders. The line will be added to 50 department store doors in the spring.
In Nautica’s core sportswear and outerwear lines, sales were flat or modestly higher, but Sanders noted an improvement in regular-price selling so far this fall. NST, its athletic line, continues to underperform and Sanders said Nautica is looking into options for the business.
In the half, profits slid 10.2 percent to $16.5 million, or 50 cents a share, from $18.4 million, or 50 cents, a year ago. Sales advanced 15.6 percent to $290.6 million from $251.5 million.

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