Blaming shifts in the timing of its holiday shipments to retailers and the sluggish retail environment, R.G. Barry Corporation, the parent of Dearfoams, reported earnings declined 22.4 percent in the first quarter ended Sept. 28, to $4.8 million, or 41 cents a share. Revenues were down 11.3 percent to $41.9 million.
Gross margins rose 220 basis points to 46.5 percent. , up 220 basis points versus 44.3 percent in the first quarter last year. Selling, general and administrative expenses of $11.9 million, up 8.0 percent versus $11.0 million in the comparable quarter a year ago, primarily reflecting increased investment spending that is aligned with long-term growth initiatives not in place one year ago.
“We are obviously disappointed in our first quarter results,” said Greg Tunney, President and Chief Executive Officer, “but ours has never been a quarter-to-quarter business. Holiday shipments to retailers can occur in either the first or second quarter, based upon retailer needs; and retail sell-through during the Christmas season has significant impact on our rate of profitability. We are working with our customers to maximize our in-store performance between now and December 31,” he said.
Changes in the timing of some seasonal footwear shipments to retailers, the decision to exit a negative-margin private label department store footwear program and sluggish retail sales all contributed to the decline in consolidated quarterly net sales compared to last year. Improved gross profit as a percentage of net sales, in spite of lower top-line and gross profit dollars, resulted from our continuing shift to a more profitable mix of products and channels.
The decline in quarterly consolidated net sales was attributed primarily to the Footwear segment, which was down $5.4 million or 14.2 percent to $32.8 million from the comparable period last year. A 160 basis point increase in Footwear gross profit as a percentage of net sales to 43.0 percent reflected the Company's continuing move toward a mix of higher-margin branded footwear sales and away from private label and licensed products.
Accessories segment net sales increased 1.4 percent, or $128,000 compared to the first quarter last year, to $9.0 million and produced a 59.1 percent gross profit as a percentage of net sales. The nearly 250 basis point increase in gross profit as a percentage of net sales versus the comparable first quarter of fiscal 2013 was driven by the Company's strategic shift out of discount and lower margin businesses, resulting in a change in product and channel mix across the segment.
Looking Ahead
“We recognize that based upon our business outlook and economic headwinds, this is not going to be an easy year for many suppliers to retail,” said Jose G. Ibarra, Senior Vice President Finance and Chief Financial Officer. “Given the current environment, we expect consolidated revenue for the year to be down slightly compared with fiscal 2013. We will have a much better view of the full year when we report on the second quarter and the first half in February.”
“We remain fully committed to our growth plan and strategy of investment in both existing and new businesses,” added Tunney. “While we continue to refine our model with a goal of balanced performance, we are not there yet. The real long-term solution for us lies in generating sustainable, profitable growth from channels such as e-commerce and international and expansion into new accessories product categories through acquisitions. Our strong operating cash flow and healthy balance sheet give us the flexibility to fund growth initiatives even in a challenging retail environment.”
