GREENSBORO, N.C. — A slowdown in heavyweight denim sales and tighter margins cut into first-quarter earnings at Cone Mills Corp.
After a $1.2 million accounting charge, Cone Mills reported earnings in the quarter ended April 3 dropped 26.8 percent to $9.2 million, 31 cents a share, from $12.7 million, or 42 cents, a year ago.
Before the accounting charge for post-employment benefits but including a $439,000 gain from discontinued operations, earnings in the latest quarter were $10.5 million, or 35 cents a share.
Sales edged up 0.5 percent, to $195.9 million from $195 million.
The company noted that the decline in earnings resulted from a decline in gross profit in the apparel fabrics segment to 18.6 percent from 21.5 percent a year ago. Interest expenses were also up. These developments were partially offset by a reduction in selling and administrative expenses and a lower effective tax rate.
Sales of apparel fabrics were up 2.5 percent from a year ago to $146 million. This growth reflected stronger sales in sportswear fabrics, offset in part by a downturn in heavyweight denim sales.
The company’s apparel fabrics backlog slipped 12.5 percent to $166.4 million primarily due to reluctance of purchasers to commit orders for denim fabrics as far in advance of shipment as last year.
J. Patrick Danahy, chief executive officer, noted that inventory corrections in the denim jeans pipeline kept the company from raising prices to cover increasing costs. It also prevented the company from realizing cost efficiencies from operating denim facilities at full capacity.