follow us

WPS profits jammed

Don Hogsett -- Home Textiles Today, August 18, 2003

WestPoint Stevens Inc., which last month sought Chapter 11 shelter from its creditors, recorded a second-quarter loss last week of $72.0 million, compared with a small year-before profit of $2.0 million.

Its sales, most notably in towels, were in virtual freefall, tumbling almost 19 percent; its margins were under crushing pressure. And WPS was hammered by a fistful of one-time restructuring and bankruptcy costs.

And a hard landing gets even harder when you pull out an off-setting income-tax credit of $34.8 million. Absent the big tax benefit, the major mill produced a pre-tax loss of $106.8 million.

WestPoint's sales, like those of virtually every other American textiles producer, slumped badly in a persistently weak retail environment as stores pulled the plug on orders and re-orders, preferring empty shelves to laying out cash and building stockpiles of product which may not sell, except on a markdown table. Sales dropped off by 18.7 percent, to $365.7 million from $449.6 million last year, a daunting shortfall of $83.9 million.

Hardest hit were terry sales, which slumped by 22.5 percent, to $116.6 million from $150.5 million last year, a drop of $33.9 million. Bedding sales were somewhat less hard hit, sliding by 16.0 percent, to $211.1 million from $251.3 million, a decline of $40.2 million.

WestPoint recorded a handful of bankruptcy and restructuring charges, including a $46.3 million non-cash goodwill impairment charge; restructuring costs of $11.9 million; and bankruptcy costs of $6.2 million.

With its sales slowing down and its plants running slow, margins thinned out painfully, narrowing by 730 basis points, or 7.3 percentage points, to 15.8 percent from 23.1 percent a year ago.

On the upside, the company continued to hack away at costs, reducing its overhead by 7.1 percent, or $4.7 million during the period. Interest expense was pared by 6.5 percent, saving WestPoint another $2.2 million.

Westpoint Stevens Inc.

Qtr. (6/30 (x000) 2003 2002 % change
(loss)
a-Second-quarter results include an $11.9 million restructuring charge; a $46.3 million goodwill impairment charge; miscellaneous expenses of $7.9 million vs. $1.7 million last year; Chapter 11 bankruptcy costs of $6.2 million; all partially offset by an income-tax benefit of $34.8 million, compared with prior-year tax expense of $1.1 million. WestPoint generated a pre-tax loss of $106.8 million vs. a year-before profit of $3.1 million.
b-Six-month results include a $13.3 million restructuring charge; a $46.3 million goodwill impairment charge; $10.4 million in miscellaneous expenses, compared with $4.1 million a year ago; $6.2 million in Chapter 11 bankruptcy costs; all partially offset by an income-tax credit of $44.3 million, compared with a year-ago tax provision of $2.3 million. The company generated a pre-tax loss of $133.3 million vs. a year-before profit of $6.3 million.
Sales $365,695 $449,572 -18.7
Oper. income (EBIT) (3,236) 38,159
Net income (72,047)a 1,991a
Per share (diluted) (1.78) 0.08
Average gross margin 15.8% 23.1%
SG&A expenses 16.7% 14.6%
Six months
Sales 744,958 884,716 -15.8
Oper. income (EBIT) 6,696 77,060 -91.3
Net income (88,953)b 54,011b
Per share (diluted) (1.78) 0.08
Average gross margin 17.6% 23.9%
SG&A expenses 16.7% 15.2%


Other Home Furnishings Sites

Casual Living
Gifts and Decorative Accessories
Home Accents Today
Kids Today
Furniture Today