Hartmarx Women's Apparel registers lower earnings in Q2

01 Jul '08

5 min read

The Women's Apparel Group segment represented approximately 23% of consolidated revenues this year compared to 21% in last year's second quarter.

The second quarter operating loss was $1.8 million in 2008 compared to operating earnings of $11.2 million in 2007. The decline was principally attributable to the Men's Apparel Group segment, although the Women's Apparel Group segment earnings were also lower.

The decrease reflected both the $24.5 million decline in sales and a lower gross margin rate of 33.0% for the quarter compared to 35.8% in 2007, resulting principally from the disposition of surplus inventories.

Selling, general and administrative expenses for the three months were $45.6 million compared to $45.2 million in 2007 on the lower sales, representing 34.7% of sales compared to 29.0% in 2007.

The current period included, among other things, $2.2 million of incremental expenses related to Monarchy and approximately $1 million of non-recurring severance charges, substantially offset by other expense reductions.

Interest expense declined to $2.0 million compared to $2.6 million in 2007, reflecting lower rates as average borrowing levels were higher. The current period net loss was $1.5 million compared to net earnings of $5.4 million in last year's second quarter.

This year's effective tax benefit rate reflected an income tax settlement which had an approximate $1 million favorable impact on the second quarter recorded tax benefit.

For the six months, revenues this year were $250.5 million with an operating loss of $5.4 million, compared to sales of $276.0 million and operating earnings of $7.9 million in 2007, reflecting this year's lower sales, gross margins and operating margins in both the Men's Apparel Group and Women's Apparel Group segments.

The women's segment represented approximately 22% of consolidated revenues this year compared to 23% in the prior six-month period. The year-to-date gross margin rate was 33.1% this year compared to 34.8% last year, reflecting the liquidation of surplus inventories and to a lesser extent, the lower percentage of women's segment sales.

Selling, general and administrative expenses for the six months of 2008 were $89.2 million compared to last year's $89.1 million on the lower sales, representing 35.6% of sales compared to 32.3% in 2007.

The current year included $3.7 million of incremental expenses associated with the Monarchy acquisition and the $1 million of non-recurring severance charges, substantially offset by other expense reductions across the Company.

Year-to-date interest expense declined to $4.0 million this year compared to $4.8 million in the prior year with the decrease attributable to lower rates as average borrowing levels were higher.

The year-to-date net loss was $5.0 million this year compared to net earnings of $2.0 million last year. As noted above, the year-to-date effective tax benefit rate of 46.4% compared to the prior year's effective tax rate of 37.5% reflected the favorable income tax settlement concluded in the second quarter.

Hartmarx Corporation

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