R.G. Barry Corporation, the parent of Dearfoams, reported a sharp gain in earnings in its third quarter ended March 30, helped by stronger margins and lower operating expenses. Net sales reached $25.8 million, up 2.7 percent from $25.1 million for the third quarter of fiscal 2012.

On a consolidated quarterly basis, the company reported:

  • A net earnings increase of 84.8 percent to $1.5 million, or $0.13 per diluted share, versus net earnings of $0.8 million, or $0.07 per diluted share, in the comparable period last year;
  • Gross profit as a percent of net sales expanded by 130 basis points to 45.9 percent from 44.6 percent one year ago; and
  • Selling, general and administrative expenses were down 2.9 percent from the equivalent period last year at $9.6 million.  

For the nine months, the company’s consolidated results included:

  • A 7.2 percent decline in net sales to $121.5 million versus $130.9 million one year ago;
  • Net earnings of $13.0 million, or $1.13 per diluted share, down from $14.1 million, or $1.24 per diluted share, in the corresponding period of fiscal 2012;
  • Improved gross profit as a percent of net sales at 43.9 percent compared to 43.1 percent in the equivalent nine-months last year; and
  • Selling, general and administrative expenses down 2.0 percent from the comparable nine-month period last year at $32.5 million.

The company said that net sales in its Footwear segment declined for both the quarter and nine months. Quarterly net sales of $16.4 million were down 4.1 percent, reflecting fewer shipments to mass and off-price customers. Nine-month net sales declined 12.1 percent to $94.2 million, reflecting, in part, the impact of the company’s decision last year to eliminate some under-performing elements of its footwear business; loss of a seasonal men’s slipper business in a national department store chain; and reduction in the size of some seasonal club programs versus 2012. Gross profit as a percentage of net sales in the footwear segment was 40.0 percent for the quarter and 40.4 percent for the nine months, reflecting improvement over the comparable periods by 60 and 40 bps, respectively. The segment generated operating profit of $2.5 million for the quarter, up 5.2 percent from $2.4 million one year ago; and $23.1 million for the nine months, down 14.2 percent from $27.0 million in the equivalent period of fiscal 2012.

In the company’s Accessories segment, quarterly net sales were $9.4 million, up 17.3 percent from one year ago; and nine-month net sales of $27.4 million were up 15.2 percent versus the comparable period last year. Segment gross profit as a percentage of net sales for the quarter expanded by 60 bps to 56.3 percent versus one year ago; and nine-month gross profit as a percentage of net sales was 55.7 percent, down 150 bps from the comparable period of fiscal 2012. The Accessories segment generated operating profit of $2.1 million for the quarter, up 44.4 percent; and $5.4 million for the nine months, an increase of 13.3 percent over the previous year.

The company’s balance sheet reflected:

  • Cash and short-term investments increased by 11.4 percent to $44.8 million from $40.2 million one year ago;
  • Consolidated inventory at $17.3 million was relatively flat versus the equivalent period last year; and
  • Net shareholders equity of $85.5 million was up from $75.8 million reported at the end of the third quarter in fiscal 2012.

Management Comments

“The strong performance of our Accessories segment and its contribution to our operating results combined with benefits realized by eliminating under-performing components of our Footwear business add to the viability of our evolving business model and position us for significant growth in the next three-to-five years,” said Greg Tunney, President and Chief Executive Officer. “We will continue to focus on meeting challenges in the marketplace through excellent performance, superior products and our growing portfolio of great accessories brands.”

“Both of our business coalitions performed at or above planned levels and our quarterly earnings nearly doubled over last year’s, making this the best March-ending quarter in our company’s 66-year history from a profit perspective,” added Jose Ibarra, Senior Vice President Finance and Chief Financial Officer. “We have clean and current inventories, a healthy cash position and the strategies necessary to continue expanding our footprint through organic and acquisition growth.”

Mr. Tunney continued, “While we will not match the record level of last year’s performance, this will be a very good year for our business. We will end Fiscal 2013 on June 29 as one of our industry’s top performers.
“We are focused on the strategies that will drive long-term, profitable growth. We are investing in our platforms and our people. We are expanding into new and underserved markets. And, we are seeking out and acquiring successful accessories brands that can help propel us to the next level. We are quite confident that we can achieve our growth and profitability targets for the businesses,” he concluded.