Tommy Hilfiger

(TOM)

reported a drop in pretax earnings, lowered its guidance and delayed filing its second-quarter earnings statement amid an investigation by federal prosecutors into tax-related matters.

Shares of the clothing brand fell as far as 10.4% on the news released Wednesday morning, but the stock was slowly regaining traction as the session progressed. It was recently down 70 cents, or 7.4%, to $8.75.

Hilfiger posted pretax income of $69.3 million for the recent quarter, down 14% from $81 million a year earlier. Revenue fell 2% to $536.1 million from $547.9 million a year earlier amid a lackluster back-to-school and fall season.

The company expects the disappointing sales trends to continue for the remainder of the year, with annual revenue for 2005 dropping to "the high single-digit percentage range as compared to fiscal 2004, although a slightly greater decline than previously projected." It posted sales of $1.88 billion for fiscal 2004.

In late September, the company disclosed that the U.S. Attorney for the Southern District of New York had issued subpoenas for records dating back to 1990, relating to payments the company made to foreign subsidiaries as buying commissions. Some former and current employees of the company have also received subpoenas.