Clothestime, citing the effects of a broad price-cutting program aimed at clearing out unusually slow-moving merchandise, said it lost $1.6 million in its fiscal 1987 third quarter ended Oct. 31, contrasted with earnings of $3.9 million in the year-earlier period.
The Anaheim-based women's discount clothing chain said sales for the quarter were up 3% to $46.8 million, compared to $45.5 million for the third quarter of its fiscal 1986.
In October, Clothestime had announced that it expected to report "sharply lower" earnings and a slight sales increase for the quarter.
"You have to take a bump in the road, and we have," President Norman Abramson said Monday. Abramson attributed the loss to lackluster demand for back-to-school sales of junior apparel, compounded by unusually hot weather on the West Coast, where the 338-store chain has many of its stores.
Like most clothing stores, Clothestime is stocked with heavier fall and winter fashions by late summer.
To make room for updated fourth-quarter fashions, the company cut prices on merchandise during the third quarter. The price-cutting further weakened profit margins because third-quarter sales came from merchandise that was purchased during healthy times when wholesale prices were high.
Abramson said the company hopes to return to profitability in the fourth quarter. He said Clothestime has benefited from a "buyer's market" at the wholesale level that has allowed it to make purchases at opportunistic prices.
But, he said, price cutting by large department stores is forcing Clothestime to keep its prices even lower.
For the first nine months of fiscal 1987, the company reported a profit of $6.2 million, down 39%, compared to $10.2 million in the year-earlier period.
Sales for the period increased 16% to $137 million, compared to $118.2 million in the year-earlier period.