Hartmarx provides 2008 revenue & earnings guidance

08 Jan '08

5 min read

Hartmarx Corporation described additional actions that will substantially complete the transformation of its moderate priced tailored clothing product lines which have adversely impacted fiscal 2007 results. The Company also furnished 2008 revenue and earnings guidance.

Homi B. Patel, chairman and chief executive officer of Hartmarx, commented, "Under intense competitive pressures and in a difficult environment, retailers serving the moderate tailored price points have continued to narrow the number of brands offered for sale, while increasing their private label offerings through direct sourcing.

In the past two years, we have tried to deal with this and the increased demands for price allowances by gradually and opportunistically shrinking our business in this category. This clearly has not been enough.

Accordingly, we have taken significant additional actions to eliminate several lines of moderate priced tailored clothing, which will significantly adversely impact fourth quarter and full year results for 2007, but which are expected to better position the Company for an earnings recovery for the full year 2008."

Mr. Patel continued, "The following are some of the major actions recently taken or to be taken:
- We have reached agreement to terminate the DKNY Donna Karan New York men's tailored clothing license, effective immediately.
- We have reached agreement to conclude our Perry Ellis tailored clothing license at the end of 2008.
- We have renegotiated minimum royalties and advertising allowances on two other licensed tailored clothing programs.
- We are significantly reducing the number of tailored clothing in-stock replenishment programs.
- We have initiated discussions to vacate an under-utilized office/distribution facility in Buffalo, New York by the end of fiscal 2008.
- We have instituted price increases for all tailored product lines effective for Fall 2008 shipments.
- We have taken appropriate inventory markdowns in 2007 to address the current environment and have made additional staff reductions in the procurement, selling and administrative areas affected by the moderate tailored product lines.

Accounting rules require that expenses associated with licenses that are being terminated in 2008 be recorded as incurred; this will result in several million dollars of losses mostly affecting the first half of 2008 relating to such programs.

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