Beeba’s Reports a $3.7-Million Loss
Because of costs related mainly to the closing of clothing manufacturing plants in Mexico and Morocco, Beeba’s Creations reported a $3.7-million loss on $27.1 million in sales for the fourth quarter ended Aug. 31. The quarter’s sales were 22% less than those a year ago.
The company’s bottom line continues to be hurt by high start-up costs and fewer sales than expected of its new Mixit line of ladies sportswear being sold in 100 specialty shops within J. C. Penney stores, Waney said. Beeba’s lost about $1 million on the $3.8 million in 1988 revenues generated by the Mixit operation, chairman Arjun C. Waney said Wednesday.
Although Waney expects Beeba’s revenue from Mixit to grow to more than $10 million in 1989, that is significantly less than the $25 million in sales the company had hoped Mixit would generate when the deal with Penney was announced in early 1987.
Write-Down in Value of 2 Plants
The quarterly loss, which contrasts with last year’s fourth-quarter profit of $1.4 million on sales of $34.9 million, was attributed mainly to a write-down of $5.2 million in the value of assets at the two plants the company plans to close over the next 120 days.
The Mexicali plant, the larger of the two, employed about 250 workers, Waney said. The company wrote off the entire value of the two facilities, although it expects to recapture some of the cost through the sale of the plant’s assets.
Fourth-quarter earnings were also damaged by a $1.1-million loss taken by Beeba’s on its discontinued Partners II clothing line, Waney said. Beeba’s is a manufacturer, importer and wholesaler of women’s clothing made under contract for a variety of retailers including Penney’s, Walmart and The Limited.
Reduced Sales for Full Year
The company also reported a significant loss on reduced sales for the full year ended Aug. 31. The loss of $4.1 million on sales of $102.4 million contrasted with a profit of $4.1 million on sales of $107.6 million in fiscal 1987.
In addition to the write-offs taken at the plants, Beeba’s faces a contingent liability on standby and other letters of credit totaling about $3.1 million. But President Steven P. Wyandt said in a statement that “present facts indicate that these letters of credit will not be called.”
Barry Sahgal, a retail analyst with Ladenburg, Thalmann & Co. of New York, said the current retail environment in general is “fairly poor and getting weaker.” The market is particularly difficult now for offshore suppliers such as Beeba’s because the longer lead time they require for product delivery leaves them exposed to “sudden fashion changes.”
“There is a real concern now (among retailers) for rapid turnaround,” Sahgal said. “That makes it that much tougher for import programs such as Beeba’s to compete with domestic suppliers.” Beeba’s Creations stock closed down $.125 a share at $8 in over-the-counter trading Wednesday.
