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Net sales of Swank men's jewelry decline

14
Aug '08
John Tulin, Chairman of the Board and Chief Executive Officer of SWANK INC, reported net sales and operating results for the Company's second quarter and six months ended June 30, 2008:

Second Quarter Results:
Net sales for the quarter ended June 30, 2008 totaled $25,755,000, a decrease of $3,501,000, or 12.0%, compared to the quarter ended June 30, 2007. Net sales of our personal leather goods increased 24.5% for the quarter compared to the same period in 2007, due principally to shipments of our new Tumi merchandise, which began shipping during the third quarter of 2007 and sales of which remained strong during the current fiscal year.

Net sales of our men's belt merchandise, however, decreased 20.4% for the quarter compared to the same period in 2007, during which we made significant shipments in connection with the expansion of a private label program, and net sales of men's jewelry decreased 25.2% over the same period last year due to lower branded and private label sales, which together more than offset the gains in our small leather goods division.

Net sales were negatively impacted overall during the quarter by a 52.6% increase in in-store markdown expenses compared to the same period last year, as several of our customers substantially increased their promotional expenditures in response to a much more difficult retail environment.

Gross profit margin for the quarter ended June 30, 2008 improved by 150 basis point to 33.0% compared to 31.5% in the year-ago period, primarily due to a successful effort to create efficiencies in our supply chain. This improvement was achieved despite the 52.6% increase in in-store markdown expense noted above.

Gross profit dollars decreased by $695,000, or 7.5%, during this period primarily as a result of the decrease in net sales, offset, in part, by reductions in certain of inventory and product-related expenses (primarily reduced display expenditures and markdowns incurred on returns of merchandise).

Selling and administrative expenses for the quarter increased $788,000, or 10.2%, and, as a percentage of sales, increased by .6% to 33.1% compared to 32.5% in the same period in 2007.

Selling expenses increased by $107,000, or 1.8%, during the quarter compared to last year, primarily due to our continued investment in product development and sourcing, as well as a small increase in compensation in our Luxury Division, which was established early in 2007.

These expenses were only partially offset by reductions in variable sales-related expenses associated with lower net sales. Expenditures for advertising and promotion, including cooperative advertising (which is accounted for as a reduction to net sales), totaled $907,000 or 3.6% percent of net sales compared to $959,000 or 3.3% of net sales last year.

Administrative expenses increased $681,000, or 37.0%, during the quarter compared to last year's first quarter. Administrative expenses expressed as a percentage of net sales was 9.8% for the quarter compared to 6.3% during the same period in 2007.


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