Clothestime Reports Loss of $4.2 million
Clothestime, the discount women’s apparel retail chain, reported a $4.2-million loss in the fourth quarter Friday, a downturn in which analysts blame the extreme price competition during the Christmas season.
In addition, the company revealed that two shareholders recently filed a class-action lawsuit against Clothestime, alleging that management released misleading information about the the firm’s financial performance prospects.
The large loss for the three months ended Jan. 27 came on revenue of $45 million. It had a loss of $2 million on sales of $45.7 million for the fourth quarter a year ago.
For the year, Clothestime posted net income of $461,000 on sales of $187 million. It had a loss of $2.2 million on sales of $171.4 million for the previous year.
“Clothestime is not the only retail company having a difficult time,” said Otto Grote, a retail analyst with Derby Securities, a New York securities research firm. “The problem was that department stores were heavily discounting goods during the peak Christmas season, and a whole raft of specialty stores and women’s apparel retailers got caught in it,” he said.
In response to Friday’s news, Clothestime stock fell 44 cents, to $4.44 in trading on the over-the-counter market.
The company said two shareholders, Herbert Van Horn and Lee Squiteri, filed a lawsuit Feb. 16 in U.S. District Court in Santa Ana against the company and several top officers, including chief executive Michael P. DeAngelo and vice chairman Raymond A. DeAngelo.
The suit, filed on behalf of those who bought Clothestime stock from April 17 to Feb. 1, alleges that company officials during that period conspired to issue “a series of false public statements . . . about Clothestime’s finances, business prospects, results from operations, marketing techniques and merchandise.”
The suit alleges that such statements helped to boost the price of Clothestime stock to $15 a share in August. The suit further alleges that when the stock price was high, Clothestime officers benefited by selling shares that they owned.
Clothestime said it needed to study the lawsuit further before responding to the allegations.
