House of Fabrics’ Profit for Quarter Plunges 88%

House of Fabrics Inc., citing its need for heavy markdowns to keep pace in the “highly competitive retail fabrics industry,” said its fiscal third-quarter profit plunged 88% from a year earlier and predicted that its fourth-quarter profit also would trail year-earlier results.

In the quarter ended Oct. 31, House of Fabrics’ net income fell to $758,000 from $6.42 million a year earlier.

The latest earnings would have been higher but for a one-time, $619,000 charge related to the company’s layoff of 35 people in its administrative work force.

The company’s third-quarter sales climbed 5%, to $146.8 million from $140.4 million.

The 693-store chain said that to counter the slide in its earnings, it is cutting costs, reducing inventories and slowing the ongoing conversion of its smaller stores into larger “superstores.”

“While net income will be less than last year’s record fourth quarter,” President Gary L. Larkins said, “we anticipate improvement from the level of the quarter just concluded.”

For the first nine months of its fiscal year, House of Fabrics’ profit dropped 74%, to $2.99 million from $11.3 million a year earlier, despite an 18% sales rise to $399.8 million from $339.8 million.