Higher sales and improved margins returned Tandy Brand Accessories Inc. to the black in its first quarter.

This story first appeared in the November 13, 2009 issue of WWD. Subscribe Today.

In the three months ended Sept. 30, the Arlington, Tex.-based accessories maker recorded profits of $1.1 million, or 15 cents a diluted share. A year ago, the firm posted a loss of $1.3 million, or 18 cents a share. The most recent quarter included a pretax gain of $1.4 million from its July acquisition of the Chambers Belt Co.

Sales in the quarter grew 7.4 percent to $37.2 million from $34.6 million a year ago. The company said sales were up across all its categories in the quarter. Its gifts segment led the trend with a 58.8 percent advance to $5.4 million.

“The year-over-year quarterly sales increase was the first one reported by Tandy in the past 12 quarters, and we fully expect that trend to continue throughout the year,” said Rod McGeachy, president and chief executive officer.

Tandy improved its gross margin in the first quarter by 360 basis points to 38.3 percent of sales from 34.7 percent. The firm said better sourcing and inventory management contributed to the improvement. Although selling, general and administrative expenses rose 6.2 percent to $13.2 million, they declined as a percentage of sales to 35.5 percent from 35.9 percent. Tandy said it will focus on cost controls in 2010 by, among other efforts, combining its corporate headquarters with its Dallas distribution center.

Tandy said it expects sales growth of between 8 and 12 percent and “significant improvement” in profitability in fiscal 2010, but warned it would still be operating in tough conditions, at least in the near term.

“Obviously the weak economic environment and specifically the protracted weak retail climate continues to impact financial results,” McGeachy said.

Following release of the results late Tuesday, shares of Tandy fell 13.7 percent Wednesday to $3.60 but rebounded 6.4 percent to $3.83 in Nasdaq trading on Thursday.

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