Operating expenses increased 14.9 percent to $13.9 million in the six-month period ended June 30, 2005 from $12.1 million in the same period of 2004. The increase in operating expenses resulted primarily from commission expenses associated with higher sales, design sample expenses, professional fees and operating personnel expenses. Operating expenses as a percentage of net sales were 30.5 percent in the six months ended June 30, 2005, compared to 30.0 percent in the same period of 2004.
Order Backlog
The Company's order backlog was $26.1 million at June 30, 2005, a decrease of 30.2 percent compared to $37.4 million at June 30, 2004. This is largely the function of a reordering of the Company's priorities. Last year, the objective was more concentrated on selling than effectively communicating a focused brand identity through balanced merchandise assortments. While orders were strong in the prior year period, profitability was negatively impacted at the end of the season.
This year, new sales management has instituted appropriate procedures to guard and refine the brand identity as well as improve profitability. The planned exit from underperforming men's doors combined with an exit from most of the women's urban department stores, essentially a clean-up versus last year, is reflected in the reduced backlog numbers. The Company remains comfortable with its ability to meet revenue and earnings targets for the remainder of the 2005 fiscal year.