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Private Label sales drop at Tarrant Apparel
20
Mar '09
Tarrant Apparel Group, a design and sourcing company for private label and private brand casual apparel, announced financial results for the fourth quarter and year ended December 31, 2008.

The Company reported 2008 fourth quarter net sales of $37.5 million, a decrease of 34.5% compared to $57.3 million in the fourth quarter of 2007. Private Label sales in the fourth quarter of 2008 were $24.0 million compared to $44.5 million the fourth quarter of 2007 due to the economic downturn and bankruptcies of significant customers such as Mervyn's. The decrease of Private Label sales in 2008 was partially offset by a $2.5 million increase in sales to a related party. Private Brands sales in the fourth quarter of 2008 totaled $13.5 million compared to $12.8 million in the fourth quarter of 2007. The increase was primarily due to increased sales to Macy's Merchandising Group.

Gross profit for the fourth quarter of 2008 was $7.3 million, compared to $11.1 million, for the fourth quarter of 2007, representing a decrease of $3.8 million or 34.3%. As a percentage of net sales, gross profit remained unchanged at 19.3% for both the fourth quarter of 2007 and 2008. The decrease in the amount of gross profit for the fourth quarter of 2008 was primarily caused by lower sales volumes.

Selling, general and administrative expenses increased by $1.1 million, or 11.0%, from $9.6 million in the fourth quarter of 2007 to $10.7 million in the fourth quarter of 2008. As a percentage of total net sales, these expenses increased from 16.8% in the fourth quarter of 2007 to 28.6% in the fourth quarter of 2008. Included in selling, general and administrative expenses in the fourth quarter of 2008 was a $1.6 million reserve on a long-term due from related parties. Included in selling, general and administrative expenses in the fourth quarter of 2007 was a $1.0 million reserve on a long-term due from related parties. Adjustment to fair value of long-term due from related parties was $0.8 million in the fourth quarter of 2007. There was no such adjustment in the fourth quarter of 2008.

Royalty expenses decreased by $297,000, or 45.6%, from $651,000 in the fourth quarter of 2007 to $354,000 in the fourth quarter of 2008. The decrease was caused by lowered royalty rates in the fourth quarter of 2008 under the amended license agreement for the American Rag Cie brand. As a percentage of total net sales, these expenses decreased from 1.1% in the fourth quarter of 2007 to 0.9% in the fourth quarter of 2008.

Goodwill impairment charges were $1.4 million in the fourth quarter of 2008, compared to no such charge in the fourth quarter of 2007. This impairment was caused by the disposition of Tarrant Apparel's 45% membership interest in American Rag Cie LLC in connection with settlement of the litigation with American Rag Cie.

Loss from operations was $5.2 million in the fourth quarter of 2008, or 13.8% oftotal net sales, compared to $61,000 in the fourth quarter of 2007, or 0.1% of total net sales as a result of the factors discussed above.


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