Hartmarx provides 2008 revenue & earnings guidance

08 Jan '08

5 min read

Last week we announced the hiring of Michael Parker as group president of HMX Tailored. Michael has many years of experience marketing to the department store channel and will play an important role in reorganizing this operation.

With these moves, we anticipate that each of the tailored clothing lines remaining at year-end 2008 will make a positive contribution in 2009.

Collectively, the actions described above to address the 2007 inventory valuation requirements, charges for selling, general and administrative staff terminations and facility impairments are expected to aggregate in the range of $13 million - $14 million of expense for 2007.

When 2007 operating results are finalized in late-January, we expect to report full year sales of $562 million and a full year diluted loss per share in the range of $.11 - $.13, which includes the inventory markdowns and other costs noted above.

Our luxury men's product lines consisting of Hickey-Freeman, Burberry men's tailored clothing and Bobby Jones, and our women's segment, most particularly from the earlier acquisitions of Misook womenswear and Simply Blue jeans, achieved sales and earnings increases in 2007.

Unfortunately, the problems in the moderate tailored clothing product lines have masked these very strong performances. For 2008, in addition to these successful businesses, we anticipate earnings contributions from our most recent acquisitions - Monarchy, Zooey and Sweater.com.

Year-end debt for fiscal 2007 was $120.7 million compared to the prior year's $113.4 million; the current year reflected over $21 million related to acquisitions and $8.2 million related to share repurchases, demonstrating our ability to generate positive cash flows to fund acquisitions, reduce borrowings or to repurchase additional shares.

We continue to look at potential acquisitions and to repurchase additional Hartmarx stock. In the fourth quarter of 2007 alone we repurchased 1.0 million shares aggregating $5.1 million.

Regarding fiscal 2008, we continue to be very cautious about the current retail environment, with first quarter results anticipated to approximate last year's first quarter revenues of $120 million and diluted loss per share of $.09, which includes the effect of licenses which will not be renewed.

This guidance anticipates that retailers in general and most of our major customers will report very disappointing Christmas sales and earnings and that there will be a build-up in retail inventories for the first half of the year.

We do, however, expect significant improvement in the second half of the year resulting in full year revenues in the range of $580 million - $600 million, which reflect the anticipated increases from recent acquisitions and expansion of luxury price point product lines.

We are estimating full year 2008 diluted earnings per share in the range of $.30 - $.40 from the favorable impact of product mix changes towards higher price point products which should produce improved gross margins and higher operating earnings.

We remain confident that the value inherent in our long-standing brands, such as Hickey-Freeman and Hart Schaffner Marx, augmented by the increasing importance of upscale brands acquired through acquisitions will result in long-term revenue and earnings growth and increased shareholder value," Mr. Patel concluded.

Hartmarx Corporation

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