NEW YORK — USA Classic Inc., which has been battered by markdowns of excess inventory, reported it expects substantial losses in the second quarter ending May 31.
The company lost $3.5 million in the first quarter, against a profit of $272,000, or 5 cents a share, a year earlier. Sales in the three months dropped 32.6 percent to $10.1 million from $15 million.
USA Classic also noted it is having problems with its factor over advances, which are “significantly in excess of the credit availability provided” in its agreements. The firm said it does not know if its factor will continue to provide support, and it is seeking other financing.
USA Classic also said that despite the inventory markdowns to raise capital for fall and holiday production, working capital shortages will force production cuts for the upcoming selling seasons. The company makes men’s, women’s and children’s activewear, sportswear and outerwear, sold under various licensed brands.
USA Classic stock slumped 2 5/8 Tuesday to close at 2 1/8 in over-the-counter trading.