Dan River warns of 4Q loss

Brent Felgner, Don Hogsett, February 12, 2001

DANVILLE, Va. — With its sales under plan in a weak retail environment, putting margins under crushing pressure, Dan River Inc. hoisted a yellow caution flag last week, warning Wall Street and investors that it will post a fourth-quarter loss of eight to 11 cents per share instead of the profit the company had earlier forecast.

The fourth-quarter loss will hold full-year earnings down to about 48 cents to 51 cents per share, the company now expects, far beneath the 68 cents profit it had earlier projected. At 48 cents to 51 cents per share, 12-month earnings will fall about 20 precent to 25 percent beneath last year's per-share profit of 64 cents per share.

The fourth-quarter profit warning marks a back-to-back disappointment for the diversified textiles producer, which had earlier recorded a 27.3 percent decline in profits during the third quarter.

While sales for the fourth quarter will come in under plan due to the continued soft retail arena, Dan River still expects to post a double-digit gain of about 11 percent on the strength of a new Kmart program. The same Kmart rollout helped to boost total company sales in the third quarter by almost 13 percent, while driving sales in the home fashions segment up by 17 percent.

Although Dan River's results have not yet been completely tabulated, the company said that total company sales for all of last year, including home fashions and apparel fabrics, will total about $663 million, a shortfall of about $7 million from a prior forecast of $670 million in annual sales. At $663 million, sales for all of last year will register a gain of about 5 percent, or $34 million, up from $629 million the previous year, lifted in large part by the new Kmart program.Dan River is scheduled to release its fourth-quarter and 12-month results on March 8.

"Dan River has faced the same challenges as other companies in our industry," said Joseph Lanier Jr., chairman and ceo. "The shortfall is due mainly to the severity of the retail sluggishness, primarily in sales of home fashions, which undercut margins in the fourth quarter."

Putting margins under even more pressure, said Lanier, was the company's ongoing program to work down its stockpiles. "Further, our commitment to inventory reduction resulted in sales of a less favorable mix of products than we had previously projected, which put additional pressure on margins."

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