Sales slip-sliding down, WPS warns

Don Hogsett, April 21, 2003

West Point, GA — With retail sales in a major slump, hurt first by severe winter weather and then the war with Iraq, textiles giant west point Stevens has warned Wall Street and investors that first-quarter sales of its bed and bath products have fallen by roughly 13 percent from year-ago levels.

Given the deep slide in sales, and resulting weakened cash flow, west point is now headed for a loss in the first quarter, following a $2.6 million fourth-quarter deficit.

With sales skidding down, the major mill said it now expects to report cash flow of about $31 million during the opening quarter, not even enough to cover its interest, which totaled $35.3 million during the prior quarter.

"Our business in the latter part of the first quarter of this year was negatively impacted by the onslaught of war and harsh winter weather conditions resulting in a sharp decline in retail demand," said Holcombe Green Jr., chairman and ceo.

The deep slide in sales marks a setback for the company after it climbed back on track during the fourth quarter of last year, boosting sales by 8.0 percent.

And WestPoint, said Green, is still wrangling with its creditors, trying to hammer out a fresh financing pact. With critical negotiations still going on, WestPoint was forced to delay filing its 10-K annual report. If negotiations with lenders are unsuccessful, WestPoint's auditor may decide to insert a statement raising questions about the company's ability to continue as a "going concern."

Cutting WestPoint some slack as talks continue, lenders gave the company an interim waiver through June 10, releasing it from any default that might stem from its failure to file the annual report on time and to comply with certain financial covenants.

"This waiver was needed to allow us adequate time to work out issues relating to resetting certain financial covenant requirements to reflect the current challenging retail environment," said Green.

Pulling a silver lining out of the clouded outlook, Green noted, "We recently concluded an excellent spring home fashions market week with significant new business coming from our targeted key retail accounts, all of which should contribute to a stronger second half of 2003."

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