Hartmarx Corp.’s full-year and fourth-quarter earnings were negatively impacted by chargebacks and allowances as well as the company’s own repositioning efforts, which are expected to bolster profits this year.

As a result, net income for the quarter ended Nov. 30 came in at $331,000, or 1 cent per diluted share, which compares with $7.3 million, or 20 cents, in the prior year on a sales gain of 4.4 percent to $163.4 million from $156.5 million. The company said in a statement that results were in line with previous guidance.

For the year-end period, net earnings were $7.3 million, or 20 cents a share, which compares with $23.6 million, or 63 cents, in the prior year on sales that were flat at $598 million.

Homi B. Patel, chairman and chief executive officer of Hartmarx, said in a statement that the company is “extremely disappointed” with its 2006 performance. “The decisive actions that we have taken in the last six months should result in a significant earnings recovery in fiscal 2007 and will further reduce our dependence on, and investment in, the moderate priced tailored clothing lines marketed principally to the mainstream department store channel,” Patel said.

“The positive impact in 2006 of product diversification initiatives, principally attributable to recent acquisitions, was overshadowed by declining margins from chargebacks, allowances and actions taken to reduce our dependence on moderate priced tailored clothing product lines,” Patel explained.

Patel said the company closed three domestic manufacturing facilities “affecting over 300 production personnel along with other administrative reductions, and incurred one-time charges for severance and facility impairments of approximately $2.9 million.”

Patel said the company also reduced domestic and offshore production commitments “and moved aggressively to dispose of surplus inventories, closing the fiscal year with consolidated inventories of $146.4 million, $6.8 million lower than last year.” Additionally, Hartmarx did not renew two moderate priced tailored clothing licenses, which “generated over $19 million of sales in fiscal 2006.”

“Collectively, these actions had a significant adverse gross margin impact due to overhead inefficiencies and required inventory valuation,” Patel said. “Certain residual effects of lower production levels will slightly impact the first quarter of fiscal 2007 compared to 2006.”

This story first appeared in the January 30, 2007 issue of WWD. Subscribe Today.

For this year, Patel said revenues are pegged to be between $585 million and $600 million while diluted earnings per share are expected to be between 50 and 56 cents.

The Fiber Price Sheet
The last Tuesday of every month, WWD publishes the current, month-ago and year-ago fiber prices. Prices listed reflect the cost of one pound of fiber or, in the case of crude oil, one barrel.
 
Price on 01/29/07
Price on 12/22/06
Price on 01/30/06 
Fiber
 
Cotton
56350 cents
51.99 cents
54.57 cents
Wool
$3.28
$3.00
$2.36
Polyester Staple
85 cents
85 cents
79 cents
Polyester filament
82 cents
82 cents
76 cents
December Synthetic PPI
 11.5.3
 115.0
 114.1
Crude Oil
 $55.42
 $63.66
 $67.76
*The current cotton price is the November average on fiber being delivered to Southeastern region mills, according to Agricultural Marketing Services/USDA. The wool price is based on the average price for the week ended Dec. 15 of 11 thicknesses of fiber, ranging from 15 microns to 30 microns, according to The Woolmark Co. Information on polyester pricing is provided by the consulting firm DeWitt & Co. The synthetic fiber producer index, or PPI, is compiled by the Bureau of Labor Statistics and reflects the overall change in all synthetic fiber prices. It is not a price in dollars but a measurement of how prices have changed since 1982, which had a PPI of 100. Oil prices reflect last week’s closing price on the New York Mercantile Exchange of future contracts for light, sweet crude oil to be delivered next month.
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