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Private Label sales fall at Tarrant Apparel Group

20
Nov '08
Tarrant Apparel Group announced financial results for the quarter and nine months ended September 30, 2008.

The Company reported total net sales of $56.0 million in the third quarter of 2008, a 20.3% decrease compared to $70.2 million in the same period in 2007. Private Brands sales were $10.2 million in the 2008 third quarter, compared to $12.0 million in the third quarter of 2007, due primarily to lower sales of the American Rag Cie brand to Macy's Merchandising Group.

Private Label sales in the quarter were $45.8 million, as compared to $58.2 million reported in the same period last year, with the decrease in the third quarter of 2008 resulting primarily from reduced demand by our customers due to a poor retail environment. The decrease in Private Label sales in the third quarter of 2008 was partially offset by a $7.6 million increase in sales to a related party.

Gross profit decreased by $3.6 million or 28.1% to $9.3 million in the third quarter of 2008 from $12.9 million in the third quarter of 2007. The decrease in gross profit was primarily due to a decrease in sales. As a percentage of total net sales, gross profit decreased from 18.4% in the third quarter of 2007 to 16.6% in the third quarter of 2008 due to a higher proportion of lower margin sales.

Selling, general and administrative expense for the third quarter of 2008 was $9.2 million compared to $9.9 million in the 2007 third quarter. As a percentage of total net sales, selling, general and administrative expense increased from 14.0% one year earlier versus 16.5% for the same period this year. The increase in selling, general and administrative expenses as a percentage of total net sales in the third quarter of 2008 was due primarily to an additional allowance for bad debts of $0.5 million related to a receivable with Mervyn's.

Royalty expense was $414,000 in the 2008 third quarter compared to $421,000 in the same period one year ago.

Loss from operations in the third quarter of 2008 was $341,000 compared to income from operations of $2.7 million in the third quarter of 2007.

Other income was $1.0 million in the third quarter of 2008, compared to $3.9 million in the third quarter of 2007. Other income in the third quarter of 2008 included a gain on settlement of $0.9 million. Other income in the third quarter of 2007 included a gain of $3.8 million on the sale of certain Mexico assets. Other expense in the 2007 third quarter included $5.0 million of expenses of financing and related costs and the remaining value of the warrants to credit facility and placement agent upon repaying the Company's term loan in full.

Net income was $207,000, or $0.01 per basic and diluted share for the 2008 third quarter, compared to net income of $1.6 million, or $0.05 per basic and diluted share for the 2007 third quarter.

For the nine months ended September 30, 2008, the Company reported total net sales of $157.8 million, a decline of 15.4% compared to $186.4 million in the year earlier period. Gross profit decreased by $7.5 million or 19.9%, to $30.3 million in the first nine months of 2008 from $37.8 million in the first nine months of 2007.


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