CHICAGO, June 30 /PRNewswire-FirstCall/ -- Hartmarx Corporation
(NYSE:HMX) today reported operating results for its second quarter
and six months ended May 31, 2008. Second quarter revenues were
$131.5 million compared to $155.9 million in 2007. The net loss was
$1.5 million or $.04 per diluted share in the current period
compared to net earnings of $5.4 million or $.15 per diluted share
last year. For the six months, revenues were $250.5 million
compared to $276.0 million in 2007. The net loss was $5.0 million,
or $.14 per diluted share in the current year compared to net
earnings of $2.0 million or $.05 per diluted share in 2007. Homi B.
Patel, chairman and chief executive officer of Hartmarx, commented,
"The overall economic and retail environment remains very difficult
and contributed to results falling far below our expectations.
Consumer confidence has been unfavorable for a number of months and
any discretionary spending, including the income tax rebate checks,
in all likelihood is going toward higher food and gas costs rather
than for discretionary apparel purchases. In addition to the
current macro-economic conditions, our first half results continued
to be adversely impacted by the residual effect on sales and
earnings from reducing our moderate tailored clothing product
offerings, including the previously announced decision not to renew
the Tommy Hilfiger and Perry Ellis licenses upon their expiration
at the end of 2008. In this difficult environment, we are focusing
on controlling our expenses, reducing our inventories and
maximizing our cash flows. We are managing our business
conservatively and reducing headcount, which reflected
approximately $1 million of second quarter severance charges. While
the actions taken to curtail our moderate tailored clothing lines
has had a significant negative near-term impact on reported
revenues and earnings, we strongly believe these actions will have
a positive impact on longer-term profitability. We continue to
focus on a disciplined execution of our longer-term strategies
fully confident that when the economy does turn around our strong
brands and emphasis on upscale products will result in significant
earnings improvement. Assuming that there is no further
deterioration in the economy, in the second half of the fiscal year
we expect to be profitable with favorable earnings comparisons to
the prior year. Accordingly, we are currently estimating full- year
consolidated revenues in the range of $530 million to $550 million.
Full- year diluted earnings per share is currently anticipated
within a range of a breakeven to a small profit." "At May 31,
inventories of $149.9 million declined $9.2 million or 6% from the
year earlier levels excluding the inventories associated with the
August 2007 Monarchy acquisition. The trailing year total debt
increase of $34.2 million to $147.2 million at May 31 this year
reflected $47.6 million of outflows attributable to acquisitions,
capital expenditures and share repurchases. To date, we have
repurchased approximately 1.1 million shares pursuant to our 3
million share authorization," Mr. Patel concluded. The second
quarter revenue decline was principally attributable to the Men's
Apparel Group segment, from reductions in the tailored product
categories. This segment also included the Monarchy product lines
which contributed $3.9 million to the current year second quarter
revenues and $7.5 million for the six months. 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
produces and markets business, casual and golf apparel under its
own brands, including Hart Schaffner Marx, Hickey Freeman, Palm
Beach, Coppley, Monarchy, Manchester Escapes, Society Brand,
Racquet Club, Naturalife, Pusser's of the West Indies, Brannoch,
Sansabelt, Exclusively Misook, Barrie Pace, Eye, Christopher Blue,
Pine IV, Worn, Blue House Drive, One Girl Who..., Zooey by alice
heller and b.chyll. In addition, the Company has certain exclusive
rights under licensing agreements to market selected products under
a number of premier brands such as Austin Reed, Tommy Hilfiger,
Burberry men's tailored clothing, Ted Baker, Bobby Jones, Jack
Nicklaus, Claiborne, Pierre Cardin, Perry Ellis, Lyle & Scott,
Golden Bear, Jag and Dr. Martens. The Company's broad range of
distribution channels includes fine specialty and leading
department stores, value-oriented retailers and direct mail
catalogs. The comments set forth above contain forward-looking
statements made in reliance upon the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such
forward-looking statements can be identified by the use of
forward-looking terminology such as "anticipate," "believe,"
"continue," "estimate," "expect," "intend," "may," "should" or
"will" or the negatives thereof or other comparable terminology.
Forward-looking statements are not guarantees as actual results
could differ materially from those expressed or implied in such
forward-looking statements. The statements could be significantly
impacted by such factors as the level of consumer spending for
men's and women's apparel, the prevailing retail environment, the
Company's relationships with its suppliers, customers, licensors
and licensees, actions of competitors that may impact the Company's
business, possible acquisitions and the impact of unforeseen
economic changes, such as interest rates, or in other external
economic and political factors over which the Company has no
control. The reader is also directed to the Company's periodic
filings with the Securities and Exchange Commission for additional
factors that may impact the Company's results of operations and
financial condition. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise. --
Financial Summary Follows -- HARTMARX CORPORATION --- UNAUDITED
FINANCIAL SUMMARY -- (000's omitted, except per share amounts)
Statement of Earnings Three Months Ended Six Months Ended May 31,
May 31, 2007 2008 2008 2007 Net sales $ 131,461 $ 155,935 $ 250,523
$ 275,980 Licensing and other income 477 526 1,025 1,009 131,938
156,461 251,548 276,989 Cost of goods sold 88,117 100,051 167,722
179,973 Selling, general & administrative expenses 45,582
45,212 89,202 89,091 133,699 145,263 256.924 269,064 Operating
earnings (loss) (1,761) 11,198 (5,376) 7,925 Interest expense 2,015
2,591 3,986 4,777 Earnings (loss) before taxes (3,776) 8,607
(9,362) 3,148 Tax provision (benefit) (2,309) 3,228 (4,348) 1,181
Net earnings (loss) $ (1,467) $ 5,379 $ (5,014) $ 1,967 Earnings
(loss) per share: Basic $ (.04) $ .15 $ (.14) $ .05 Diluted $ (.04)
$ .15 $ (.14) $ .05 Average shares: Basic 34,892 36,070 34,881
36,057 Diluted 34,892 36,625 34,881 36,635 * * * May 31, Condensed
Balance Sheet 2008 2007 Cash $ 3,581 $ 2,165 Accounts receivable,
net 81,883 96,919 Inventories 149,891 153,221 Prepaid expenses and
other assets 34,835 23,291 Goodwill and intangible assets 100,081
87,244 Deferred income taxes 68,528 38,627 Prepaid/intangible
pension asset - 38,000 Net fixed assets 35,013 32,895 Total assets
$473,812 $472,362 Accounts payable and accrued expenses $ 87,599 $
86,527 Total debt 147,170 112,943 Accrued pension liability 14,504
8,426 Shareholders' equity 224,539 264,466 Total liabilities and
shareholders' equity $473,812 $472,362 Book value per share $ 6.28
$ 7.20 Selected cash flow data (year-to-date): Capital expenditures
$ 9,368 $ 5,388 Depreciation of fixed assets 2,819 2,624
Amortization of intangible assets, long-lived assets and stock
compensation expense 2,906 3,395 This information is preliminary
and may be changed prior to filing Form 10-Q. No investment
decisions should be based solely on this data. DATASOURCE: Hartmarx
Corporation CONTACT: Fiona Chiotellis of Hartmarx, +1-646-810-0414
Web site: http://www.hartmarx.com/
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