The company reported a 6 percent increase in sales for its third quarter, ending 31 December, up from $44.5m to $47.3m, which was driven by an 82 percent increase in sales from US department stores.
However, CEO Neil Katz pointed out that the rise in sales was the result of an aggressive and costly marketing and advertising campaign, while challenging conditions in the company’s international markets further weighed down on the bottom line.
Significant dip in operating profit
This was reflected in a significant dip for the company’s operating results, which fell from a $3.9m profit in the corresponding quarter of 2007, to a loss of $9.6m for the current holiday season quarter.
“The global economic turmoil, compounded with a volatile US dollar, negatively impacted our international sales, which declined 34 percent compared to the same prior year period, further reducing our operating profit,” he said.
Net losses for the quarter came in at $4.5m, compared to a positive net income of $0.2m in the corresponding quarter of 2007, a result that sent share prices fall 23 percent to their lowest level in five years.
Focus on cost cutting
The company says it is expecting to further cut back on costs in the year to come, as it tries to close the gap on its failing profits margin.
Katz said that the company would be looking at further reducing costs in all aspects of its pricing and its staffing in the current financial year, a factor which he believes should help to turn around the company’s fortunes.
“We expect the final quarter of this fiscal year to be profitable, assuming no further major deterioration of the global economy,” he said.