Tarrant Apparel Group announced financial results for the three months ended March 31, 2008. The Company reported net sales of $50.5 million in the first quarter of 2008, a 10% decrease compared to $56.1 million in the same period in 2007. Private Brands sales were $8.3 million in the 2008 first quarter, compared to $7.9 million in the first quarter of 2007. Private Label sales in the quarter were $42.2 million, as compared to $48.2 million reported in the same period last year.
Gross profit decreased by $2.3 million or 18.7% to $10.0 million in the first quarter of 2008 from $12.3 million in the first quarter of 2007. The decrease in gross profit was partially due to a decrease in sales. As a percentage of total net sales, gross profit decreased from 22.0% in the first quarter of 2007 to 19.9% in the first quarter of 2008. The decrease in gross margin in the first quarter of 2008 was caused by comparatively more discounts and allowances given to retailers as a result of a slowdown in the economy.
Selling, general and administrative expenses for the first quarter of 2008 were $9.7 million compared to $9.9 million in the 2007 first quarter. As a percentage of total net sales, selling, general and administrative expenses increased to 19.3% versus 17.7% for the same period of the prior year due to a lower level of sales. Included in selling, general and administrative expenses in the first quarter of 2008 was a charge of $848,000 resulting from liquidated damages imposed by the U.S. Customs on two of the Company’s overseas vendors in April 2008. The goods were imported in 2005 and these vendors who are typically responsible for these liquidated damages are no longer operating.
Royalty expenses decreased by $24,000, or 6.6%, to $334,000 in the first quarter of 2008 from $358,000 in the first quarter of 2007. Terminated acquisition expenses in the first quarter of 2007 were $2.0 million, or 3.6% of total net sales, compared to no such expense in the first quarter of 2008.
Loss from operations was $43,000 in the first quarter of 2008 compared to income from operations of $64,000 in the first quarter of 2007. The net loss for the 2008 first quarter was $253,000 or a loss of $(0.01) per share compared to a net loss of $1.0 million or $(0.03) per share in the year earlier period.
"It is just unfortunate that our positive result in the first quarter was reversed by the need to record a charge for liquidated damages imposed by US Customs in April on some overseas vendors who are no longer operating. We continue to operate in a difficult environment, as retailers continue to face many of the challenges created by a slowing economy and high energy prices,” said Gerard Guez, Chairman and Interim CEO of Tarrant Apparel Group.
"In this environment, we remain highly focused on tight expense controls, while seeking ways to improve sourcing and inventory management. We also continue to work closely with our customers, to ensure that they receive highly attractive products on a timely basis. We believe Tarrant Apparel has taken the necessary measures to operate efficiently during this downturn, and are well positioned to return to growth when consumer spending begins to increase."
