CHICAGO – Shares of Hartmarx Corp. suffered an 11.3% setback in New York Stock Exchange trading Thursday after the firm, hurt by weakness in its moderate tailored clothing business, reported a decline in second-quarter earnings and scaled back its year-end guidance.
For the three months ended May 31, net income dropped 28.5 percent to $3.9 million, or 10 cents a diluted share, from $5.4 million, or 15 cents, in the year-ago quarter. Sales advanced 4.7 percent to $152.6 million.
“The ongoing consolidation and other ownership changes in the mainstream department store channel resulted in lower margins in the moderate priced tailored clothing product category,” said Homi Patel, chairman and chief executive of the firm, in a statement. “We experienced more off-price sales and customer allowances than previously anticipated.”
As a result of the shortfall, and without a change in market dynamics anticipated in the near future, Hartmarx reduced its year-end guidance for earnings per share to between 50 and 55 cents, including charges that may result from actions to reduce expenses and inventories and “prune those programs that are not contributing sufficient incremental margins,” according to Patel. The guidance reduction was the first such action in five years, he said.
Year-end EPS was originally expected to be 12% to 20% higher than last year’s final tally of 63 cents. Revenues continue to be expected to advance in the low- to mid-single digits.
Patel said that higher-priced clothing performed well, as did the acquired Misook and Simply Blue businesses. He reiterated the firm’s interest in pursuing acquisitions “that can be accretive to earnings.”
Shares ended the day at $6.36, down 81 cents.
For the six months, earnings were off 32.9%, to $6.5 million, or 17 cents, while sales advanced 2.5% to $296.8 million.