Clothestime Blames Markdowns for Loss

Clothestime Inc. blamed heavy markdowns in the Christmas season in announcing that it expects a net loss for the fourth quarter ended Jan. 27.

The retail chain said Thursday that it took “significant” inventory markdowns during the 1989 fourth quarter because of the “highly promotional environment” among its competitors, company executives said. The markdowns were “probably 25%” greater than Clothestime’s normal seasonal markdowns, said John Shanklin, vice president and chief financial officer.

In addition to “competitive pressures,” Shanklin said that unusually warm weather during the three-month period caused Clothestime to mark down its merchandise and begin moving in spring goods earlier.

“We were caught with too much inventory, and it cost us profits,” he said.

While the company will not report final numbers until March, it estimated sales for fiscal 1989 to be $187.1 million, a 9% increase from the prior year. Fourth quarter sales were estimated at $45 million, a 1% drop from $45.6 million recorded in the comparable period last year.

The company did not estimate the expected fourth-quarter loss, but said it expects to report a “slight profit” for fiscal 1989, Shanklin said.

One reason is that sales during the Christmas season make up only about 11 to 13% of the apparel retailer’s total annual sales.

In the fourth quarter one year ago, Clothestime reported a net loss of $2 million. For fiscal 1988 ended Jan 18, 1989, the company lost $2.2 million on sales of $171.4 million.

Sales for the four weeks ended Jan. 27 were $10.9 million or 4% higher than the $10.4 million in the same period last year, the company reported Thursday. Comparable store sales for the four weeks of January climbed 4%.