Hampshire Group, Limited announced its results for the first quarter ended March 30, 2013.
Net sales for the 2013 first quarter were $19.9 million compared to $22.6 million in the first quarter of 2012. The loss from continuing operations before income taxes was $5.2 million, compared to a loss of $5.3 million for the prior year. The Company reported a loss per share from continuing operations of $0.72 compared to $0.80 for the same period last year.
The 11.8% decrease in net sales was due to lower net sales from Rio Garment, our Honduran manufacturing plant, offset by an increase in new Dockers tops business. Gross profit for the quarter was $3.6 million vs. $3.8 million a year ago.
The gross margin for the quarter was 18.2%, an increase over the 16.9% in the same quarter last year. Gross margin improvement stemmed from production of more fashion-oriented product with higher average selling prices from Rio Garment as well as manufacturing efficiencies at the Honduran facility, offset by lower margins under Dockersand Panama Jack licensing deals.
Selling, general and administrative expenses for the quarter were $8.1 million or 40.6% of net sales vs. $9.0 million or 40.0% of net sales in last year’s quarter. The $0.9 million decrease in SG&A came from cost savings measures implemented in 2012 offset by $0.3 million in advisory consulting services during the current year quarter. Hampshire Group recorded $0.7 million in contract termination charges for the quarter related to severance expenses.
For the quarter, the Company had negative EBITDA of $4.2 million compared to negative $3.9 million for the same period last year. Adjusted EBITDA, which excludes contract terminations, restructuring and stock based compensation charges, was negative $3.4 million compared to negative $3.7 million for the comparable period last year.
The Company ended the quarter with $6.2 million in cash and cash equivalents, including $0.7 million of restricted cash, compared to $12.5 million at December 31, 2012. The sequential decline was a result of lower sales and higher ending inventory. The Company’s working capital was $20.1 million at March 30, 2013 compared with $24.9 million at December 31, 2012.
“The first quarter results are unacceptable to me and to the board,” said Paul Buxbaum, CEO of Hampshire Group, “and I am confident this company can and will perform better. We are embarking upon a new period for Hampshire, one noteworthy for change and focused on profitability, prudent allocation of resources and growth.”
“The board of directors and I are making needed improvements to refocus the Company. These include two senior management changes, a new CEO and new head of sourcing and operations, and turnover of three long-standing members of the board of directors and appointment of two new directors.
"The board and senior management have an owner orientation, with insiders owning nearly half the company. Going forward, incentive plans for management will be aligned more directly with stock value. We are certain to implement more management and personnel changes as we attack costs, implement a new sourcing and merchandising strategy, eliminate unprofitable business and refocus the firm's culture.”
Management believes there is a clear path to incremental profitability by:
- Realizing the opportunity to grow Rio Garment;
- Improving gross margins and growing sales in the Hampshire Brands business;
- Leveraging firm's infrastructure and reputation in the apparel industry with new customer relationships and complementary lines of business;
- Reducing overall costs with a focus on our annual real estate expense.
Mr. Buxbaum concluded, “I was appointed CEO in January 2013. Given long lead times in the apparel industry, sales and margins are contracted and fixed for most of this year. We are pushing to produce profitability for this year, but shareholders will not see the full impact of recent changes until 2014. I am confident we will produce over time a healthy, growing and profitable company.”
Hampshire Group
