Nautica Enterprises, Inc. announced its decision to transition its Nautica business in Europe to licensing or other arrangements through Nautica Apparel, Inc., the Company’s global brand licensing subsidiary. The Nautica Europe business today represents less than 2% of the Company’s total net sales.
The Company’s transition strategy has been developed to limit its financial investment in Europe while expanding the Nautica brand’s European market share. Christopher Heyn, President of Nautica Apparel, Inc., will lead the licensing efforts or find alternative arrangements. Under this plan, Nautica Apparel, Inc. will continue to license the Nautica brand in Greece, Turkey and Eastern Europe through Ridenco, and will seek to expand this relationship to include Italy, with showrooms located in Milan and Bologna. Nautica Apparel, Inc. is also evaluating a proposal to license the brand in Spain and Portugal to the current management team that has built a successful business in these countries for Nautica Europe. The Company closed its sales office in Germany during the fourth quarter and will be closing its sales office in France as well as its London headquarters. The Company expects to complete this transition plan by the second half of fiscal 2004.
Harvey Sanders, Chairman, President and Chief Executive Officer of Nautica Enterprises, Inc., commented, “We remain committed to Europe and strongly believe in the long term global opportunities for the Nautica brand. We believe that by implementing this plan we will achieve two important objectives. First, we will significantly limit the Company’s capital investment in Europe, and second, expand upon the platform to realize our goals in the European marketplace.”
As a result of the transition plan, the Company will incur an after-tax special charge of $6.0 million to $7.0 million relating to the following: certain wind-down and closure costs; the impairment of goodwill; the write down of fixed assets; and the termination of certain lease obligations. Approximately $1.6 million, or $0.05 on an earnings per share basis, will be recorded in the fourth quarter of fiscal 2003. The balance of $4.4 million to $5.4 million, or $0.13 to $0.16 on an earnings per share basis, is expected to be recorded in the first half of fiscal 2004.
Excluding this special charge, the Company remains comfortable with the current analysts consensus estimate of $0.21 per diluted share in the fourth quarter of fiscal 2003, which compares to $0.02 per diluted share reported in the prior year period (excluding fourth quarter fiscal 2002 special charges). Including the special charge announced today, the Company expects to report earnings per diluted share of $0.16 for the fourth quarter of fiscal 2003.
Mr. Sanders added, “Chris Heyn and his team have established very solid working relationships with our existing global licensing partners, and we look forward to the positive impact that the entire Nautica Apparel team will have in expanding the presence of the Nautica brand throughout Europe.”
Mr. Heyn concluded, “Ridenco is a very strong partner and supporter of the Nautica brand, as evidenced by the success we have had in Greece, Turkey and Eastern Europe. We expect to further build upon this solid foundation as well as establish other key arrangements in important markets over the next several months.”
