slashed guidance Monday, citing the impact of Hurricane Katrina and the loss of a big sweatpants line at
The Atlanta-based sweatshirt maker said it now expects to make around 55 cents a share for the third quarter and $1.30 a share for the year, excluding what it called the "direct negative impact" of Katrina. Russell said the storm would slash 16 to 20 cents a share from 2005 earnings.
Analysts surveyed by Reuters Research had forecast a 66-cent profit for the third quarter and earnings of $1.43 a share for the year.
"We are disappointed that some of the operational issues impacting our business have lingered into the third quarter," CEO Jack Ward said. "Attempts to eliminate these issues have now been delayed or reduced by the devastation of Hurricane Katrina. We continue to make operational improvements while minimizing the impact of Katrina on both our business and our ability to serve our customers."
Russell said it lost some 40 containers' worth of product when Katrina hit a key port in Gulfport, Miss. "While the direct damage to property was generally fully insured, subject to deductibles, much of the displaced product was already committed to customers and cannot be replaced in time for the fall selling season," Russell said. "Related extra costs and the indirect loss of sales and profits have not been fully determined at this point."
Russell also said it was looking at a setback on the retail front.
"Beyond 2005, Wal-Mart has indicated that the Jerzees brand of sweatshirts and sweatpants will be featured only in its Men's Department beginning in the second half of 2006. Previously, Jerzees had distribution for both the men's and boys' fleece programs at Wal-Mart and Russell currently expects to continue to be the exclusive supplier of the men's basic fleece program. The sales loss from the boys' program represents between 2% and 3% of the company's total revenues. The impact of this decision is being evaluated, as are alternative operational plans for existing capacity," Russell said.
Russell closed Friday at $17.99.