Tarrant Slashes Fiscal Outlook, Stock Drops
Citing a variety of reasons, including a soft denim market, lost distribution channels and unexpected shipping costs, Los Angeles– based private-label manufacturer Tarrant Apparel Group dropped its sales and profit projections for fiscal 2005.
The Back-to-School season, historically a strong market for denim, proved unexpectedly weak this year; the problem was compounded by an influx of new premium denim lines competing for market share, Tarrant said. U.S. safeguards against Chinese imports created shipping difficulties for Tarrant, which incurred steep airfreight and other costs on merchandise that was under threat of embargo.
The company, whose largest account is with affiliated stores owned by The Limited Inc., also suffered when major client Kmart Corp. discontinued distribution of Tarrant’s Gear 7 brand. Kmart officials did not return calls to comment on the report.
The revised outlook estimates Tarrant will realize a profit of $1 million to $2 million on net sales of $210 million to $215 million. As recently as August, the company was forecasting earnings of $9 million to $12 million on revenues of $240 million to $250 million.
The company’s stock tumbled 65 cents on the news to close at $1.04 on the Nasdaq. According to Market Gainer, an online financial newsletter, 120,000 shares changed hands. The stock reached a $4.22 high and fell as low as 86 cents in 52 weeks of trading but has been in gradual decline since late October.
Tarrant, which hasn’t turned a profit since 1999, will release its third-quarter results Nov. 10. The company is pinning its hopes on its Princy by Jessica Simpson brand and the House of Dereacute;on line— whose co-creative director is Tina Knowles, the mother of singer Beyonceacute; Knowles—which begins shipping this month. —Erin Barajas
