WestPoint cuts its losses

Don Hogsett, February 11, 2002

WEST POINT, GA — Building sales, bulking up margins, and shedding some of the restructuring charges that dogged the bottom line a year ago, WestPoint Stevens recorded a sharply narrowed fourth-quarter loss of $2.6 million, compared with a much larger year-ago deficit of $8.9 million.

In a punishing retail environment, sales advanced by 3.3 percent, to $431.8 million from $418.2 million last year, sparked by sales of new Disney and Ralph Lauren programs. But without the added momentum of those two new licenses, comparable sales in the company's core bed and bath programs were flat, said Lorraine Miller, senior vice president, in a conference call with analysts and investors.

Indeed, at $432 million, fourth-quarter sales fell almost $50 million beneath an expected level of $480 million, said Miller.

Assaying current business conditions, Miller cautioned that sales in the current first quarter are expected to decline by roughly 2 percent from year-ago levels, to about $410 million. Miller forecast first-quarter earnings will come in somewhere between a $0.10 per-share loss and break-even. For all of this year, the company said it now expects sales growth of about 4 percent, and earnings per share in the range of $0.45 to $0.50.

Taking one last bite out of the bottom line in the closing quarter was a $1.2 million pre-tax charge — $800,000 on an after-tax basis — tied to WestPoint's eight-point restructuring and cost-cutting plan. Lester Dupuy Sears, cfo, told investors it's the last time WestPoint will take a charge in connection with the overhaul program. So far, he said, WestPoint has spent a total of $54 million to overhaul operations, a move which is expected to generate annual cost savings of $38 million a year.

Holcombe Green Jr., chairman and ceo, commented: "We are pleased that we were able to increase sales in the fourth quarter despite the effects of the ongoing recession and sluggish retail environment. In order to control inventory levels, we took additional downtime during the latter part of the quarter that resulted in unabsorbed overhead of roughly $5 million." As a result, said Green, inventories declined about 2 percent, or $10 million from year-ago levels.

WestPoint Stevens Inc.

Qtr. 12/31/01 (x000) 2001 2000 %CHG
(loss) a-Fourth-quarter results in the year-ago period included a $7.2 million restructuring and impairment charge; Results this year include $2.5 million in miscellaneous expenses, down 42.2 percent from $4.3 million last year; and an income-tax benefit of $1.4 million, compared with a $5.0 million benefit last year. b-12-month results include a $5.0 million restructuring and impairment charge vs. a $34.9 million charge the prior year; miscellaneous expenses totaled $16.3 million, up 42.7 percent from $11.4 million in 2000; and an income-tax a benefit of $15.2 million, compared with a $63.3 million tax benefit the year before.
Sales $431,809 $418,205 3.3
Oper. income (EBIT) 33,785 28,379 19.0
Net income (2,579)a (8,925)a
Per share (diluted) (0.05) (0.18)
Average gross margin 22.9% 21.1%
SG&A expenses 15.1% 14.3%
12 months 2001 2000 %CHG
Sales 1,765,146 1,815,870 -2.8
Oper. income (EBIT) 120,355 144,145 -16.5
Net income (27,348)b (63,310)b
Per share (diluted) (0.55) (1.28)
Average gross margin 21.4% 21.4%
SG&A expenses 14.6% 13.5%

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