Losses mount at Hampshire Group in Q3

For the quarter ended September 28, 2013, the Company reported net sales of $25.0 million and a loss from continuing operations of $1.4 million, or $0.18 per share, as compared to net sales of $35.1 million and a loss from continuing operations of $0.3 million, or $0.04 per share, for the same period of 2012.

The decrease in net sales resulted from lower volume caused from the expiration of licensing agreements with Geoffrey Beene and Joseph Abboud at the end of 2012. These declines accounted for approximately $9.0 million of the total decline which was partially offset by a slight increase in net sales in our Rio Garment division.

Gross profit for the quarter ended September 28, 2013 was $5.4 million, or 21.6% of net sales, compared to $7.0 million, or 19.9% of net sales, in the same period of 2012. The decrease in gross profit was primarily due to the decrease in net sales from the expiration of licensing agreements with Geoffrey Beene and Joseph Abboud. The improvement in the gross profit margin primarily resulted from a sales mix change from the same period of 2012.

Selling, general and administrative (“SG&A”) expenses for the quarter ended September 28, 2013 were $8.1 million, or 32.2% of net sales, compared to $7.3 million, or 20.7% of net sales, in the same quarter of 2012. The increase in SG&A expenses resulted primarily from two items.

First, rent expense increased in the quarter ended September 28, 2013 as compared to the same period of 2012 because the period in 2012 contained a one-time credit to rent expense resulting from a reduction in the Company’s estimated loss on lease obligation liability related to its New York office. Second, freight and warehouse charges increased in the quarter ended September 28, 2013 as compared to the same period of 2012 resulting from higher shipping charges at Rio Garment which the Company does not expect to recur.

For the quarter ended September 28, 2013, the Company’s earnings before interest, taxes, depreciation and amortization, referred to as EBITDA, was negative $2.0 million compared to negative $0.4 million for the same period of 2012. Adjusted EBITDA, which excludes contract termination charges, restructuring costs and stock-based compensation expense, was negative $1.6 million compared to $0.1 million for the comparable period of 2012.

The Company concluded the quarter ended September 28, 2013 with $2.0 million in cash and cash equivalents as compared to $12.5 million as of December 31, 2012. The decline in cash was primarily the result of seasonal increase in inventory and accounts receivables. Working capital increased to $24.1 million at the conclusion of the quarter ended September 28, 2013 as compared to working capital of $22.8 million as of December 31, 2012.

“While the third quarter results remain poor and disappointing, the Company continues to make significant progress towards the restructuring of the business as we re-engineer most of the Company’s operating procedures,” said Paul Buxbaum, CEO of Hampshire Group. “We remain encouraged that the results of this work will begin to affect the Company’s operating performance in 2014 and beyond.”

Hampshire