Hartmarx Third Quarter Results Continue to Be Adversely Impacted by Consumer Spending Slowdown and Retailers' Near-Term Negative

CHICAGO, Oct. 1  /PRNewswire-FirstCall/ -- Hartmarx Corporation (NYSE: HMX) today reported operating results for its third quarter and nine months ended August 31, 2008.  Third quarter revenues were $124.0 million compared to $135.2 million in 2007.  The net loss was $2.4 million or $.07 per diluted share in the current period compared to net earnings of $.5 million or $.01 per diluted share last year.  For the nine months, revenues were $374.5 million compared to $411.2 million in 2007.  The net loss was $7.4 million, or $.21 per diluted share in the current year compared to net earnings of $2.5 million or $.07 per diluted share in 2007.

Homi B. Patel, chairman and chief executive officer of Hartmarx, commented, "Our very disappointing third quarter and year-to-date operating results are reflective of a most challenging economic and retail environment.  Low consumer confidence, declines in discretionary apparel purchases particularly by professional men, volatility in the financial services sector, large retailers' requests to defer advance order shipments and the deteriorating credit worthiness of small specialty store retailers all contributed to a very difficult quarter.  The Company also continues to be adversely impacted by the residual effects of its previously announced strategy to reduce moderate tailored clothing product offerings, resulting in lower sales, increased  liquidations of surplus inventories, and losses associated with licensing minimums related to brands which will no longer be marketed in 2009."

Mr. Patel continued, "In this extremely uncertain economy, we are committed to reducing expenses further and improving operational productivity and cash flows, despite its adverse impact on current year revenues and earnings.  During the third quarter we disposed of surplus inventories which lowered our gross margin rate but, along with strict disciplines on new inventory commitments, resulted in an $18.6 million or 11% reduction in net inventories, exceeding the percentage revenue decline.  We have continued paring down staffing levels in various administrative functions.  Fourth quarter results, to be reported in January, will reflect additional severance costs associated with lower staffing levels in general and the closing of a sewing facility in Missouri affecting approximately 150 employees.  We also expect by fiscal year-end to reduce leased office and distribution square footage, actions which collectively would adversely impact fiscal 2008 results, but be beneficial to operating results in 2009 and beyond.  In light of the current environment, we will continue to carefully review the profit contribution prospects of certain other product lines in relation to their required working capital investment.

We are currently estimating full-year revenues in the range of $490 - $500 million, which would result in fourth quarter revenues in the range of $115 - $125 million.  This compares to the prior year fourth quarter and full-year revenues of $151.2 million and  $562.4 million, respectively.  The fourth quarter net loss excluding non-recurring items is estimated in the range of $.05 - $.10 per diluted share compared to the prior year's fourth quarter loss per diluted share of $.19.  This would aggregate to a full year loss per diluted share in the range of $.25 - $.35 in 2008 compared to the prior year loss per diluted share of $.12.  While we remain committed to our stated long-term growth strategies, we are operating our business in a very cautious and conservative manner," Mr. Patel concluded.

At August 31, inventories of $148.0 million declined $18.6 million or 11% from the year earlier levels of $166.5 million.  The trailing year total debt increase of $21.6 million to $155.9 million at August 31 this year reflected approximately $36 million of outflows attributable to acquisitions, capital expenditures and share repurchases.  To date, approximately 1.1 million shares have been repurchased pursuant to the Company's 3 million share authorization; there were no share repurchases during the third quarter.

The third quarter revenue decline was principally attributable to the tailored product categories included in the Men's Apparel Group segment.  This segment also included the Monarchy product lines, acquired in August, 2007, which contributed $6.0 million to the current year third quarter revenues ($.9 million of revenues in 2007) and $13.6 million for the nine months.  The Women's Apparel Group segment represented approximately 25% of consolidated revenues this year compared to 26% in last year's third quarter.

The third quarter operating loss was $2.1 million in 2008 compared to operating earnings of $3.0 million in 2007.  The decline was principally attributable to the Men's Apparel Group segment, although the Women's Apparel Group segment earnings were also lower.  The decrease reflected both the $11.2 million decline in sales and a lower gross margin rate of 32.8% for the quarter compared to 34.5% in 2007, resulting principally from fewer full-price sales and the disposition of surplus inventories.  Selling, general and administrative expenses for the three months were $43.5 million compared to $44.4 million in 2007 on the lower sales, representing 35.1% of sales compared to 32.8% in 2007.  The current period included, among other things, $2.1 million of incremental expenses related to Monarchy, which were more than offset by other expense reductions across the Company.  Interest expense declined to $1.8 million compared to $2.0 million in 2007, reflecting lower rates as average borrowing levels were higher.  The current period net loss was $2.4 million compared to net earnings of $.5 million in last year's third quarter.

For the nine months, revenues this year were $374.5 million with an operating loss of $7.4 million, compared to sales of $411.2 million and operating earnings of $10.9 million in 2007, reflecting this year's lower sales, gross margins and operating margins in both the Men's Apparel Group and Women's Apparel Group segments.  The women's segment represented approximately 23% of consolidated revenues this year compared to 24% in the prior nine-month period.  The year-to-date gross margin rate was 33.0% this year compared to 34.7% last year, reflecting fewer full-price sales, the liquidation of surplus inventories and, to a lesser extent, the lower percentage of women's segment sales.  Selling, general and administrative expenses for the nine months of 2008 were $132.7 million compared to last year's $133.5 million on the lower sales, representing 35.4% of sales compared to 32.5% in 2007.  The current year included $5.8 million of incremental expenses associated with the Monarchy acquisition, which were more than offset by other expense reductions across the Company.  Year-to-date interest expense declined to $5.8 million this year compared to $6.8 million in the prior year with the decrease attributable to lower rates as average borrowing levels were higher.  The year-to-date net loss was $7.4 million this year compared to net earnings of $2.5 million last year.  The year-to-date effective tax benefit rate of 43.7% compared to the prior year's effective tax rate of 38.6% reflected an income tax settlement during the second quarter which had an approximate $1 million favorable impact on the year-to-date recorded tax benefit.

Hartmarx produces and markets business, casual and golf apparel under its own brands, including Hart Schaffner Marx, Hickey Freeman, Palm Beach, Coppley, Monarchy, Manchester Escapes, Society Brand, Racquet Club, Naturalife, Pusser's of the West Indies, Brannoch, Sansabelt, Exclusively Misook, Barrie Pace, Eye, Christopher Blue, Pine IV, Worn, Blue House Drive, One Girl Who..., Zooey by alice heller and b.chyll. In addition, the Company has certain exclusive rights under licensing agreements to market selected products under a number of premier brands such as Austin Reed, Tommy Hilfiger, Burberry men's tailored clothing, Ted Baker, Bobby Jones, Jack Nicklaus, Claiborne, Pierre Cardin, Perry Ellis, Lyle & Scott, Golden Bear, Jag and Dr. Martens. The Company's broad range of distribution channels includes fine specialty and leading department stores, value-oriented retailers and direct mail catalogs.

The comments set forth above contain forward-looking statements made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  Such forward-looking statements can be identified by the use of forward-looking terminology such as "anticipate," "believe," "continue," "estimate," "expect," "intend," "may," "should" or "will" or the negatives thereof or other comparable terminology.  Forward-looking statements are not guarantees as actual results could differ materially from those expressed or implied in such forward-looking statements.  The statements could be significantly impacted by such factors as the level of consumer spending for men's and women's apparel, the prevailing retail environment, the Company's relationships with its suppliers, customers, licensors and licensees, actions of competitors that may impact the Company's business, possible acquisitions and the impact of unforeseen economic changes, such as interest rates, or in other external economic and political factors over which the Company has no control.  The reader is also directed to the Company's periodic filings with the Securities and Exchange Commission for additional factors that may impact the Company's results of operations and financial condition.  The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

                                       HARTMARX CORPORATION
                               --- UNAUDITED FINANCIAL SUMMARY --
                             (000's omitted, except per share amounts)


  Statement of Earnings   Three Months Ended           Nine Months Ended
                               August 31,                  August 31,
                           2008         2007           2008          2007
  Net sales             $ 123,956     $135,202      $ 374,479     $411,182
  Licensing and other
   income                     808          656          1,833        1,665
                          124,764      135,858        376,312      412,847
  Cost of goods sold       83,352       88,494        251,074      268,467
  Selling, general &
    administrative
    expenses               43,468       44,407        132,670      133,498
                          126,820      132,901        383,744      401,965
  Operating earnings
  (loss)                   (2,056)       2,957         (7,432)      10,882
  Interest expense          1,803        2,018          5,789        6,795
  Earnings (loss) before
    taxes                  (3,859)         939        (13,221)       4,087
  Tax provision (benefit)  (1,425)         397         (5,773)       1,578
  Net earnings (loss)   $  (2,434)  $      542     $   (7,448) $     2,509

  Earnings (loss) per
  share:
    Basic                  $ (.07)       $ .02         $ (.21)       $ .07
    Diluted                $ (.07)       $ .01         $ (.21)       $ .07

  Average shares: Basic     35,063      36,045         34,942       36,053
                  Diluted   35,063      36,652         34,942       36,639

                                                * * *


                                         August  31,
  Condensed Balance Sheet           2008           2007
                                                           
  Cash                         $    4,765     $    5,015
  Accounts receivable, net         91,335         96,950
  Inventories                     147,987        166,548
  Prepaid expenses and other
   assets                          34,119         24,123
  Goodwill and intangible assets   99,953         99,675
  Deferred income taxes            70,131         38,582
  Prepaid/intangible pension
   asset                                -         37,843
  Net fixed assets                 34,818         32,227
  Total assets                   $483,108       $500,963

  Accounts payable and accrued
   expenses                    $   91,823     $   92,802
  Total debt                      155,909        134,338
  Accrued  pension liability       13,488          8,477
  Shareholders' equity            221,888        265,346

  Total liabilities and
   shareholders' equity        $  483,108       $500,963

  Book value per share             $ 6.17         $ 7.24


  Selected cash flow data
   (year-to-date):

  Capital expenditures         $   14,749       $  8,893
  Depreciation of fixed
   assets                           4,097          4,005
  Amortization of intangible
   assets, long-lived assets
   and stock compensation
   expense                          4,325          4,787


  This information is preliminary and may be changed prior to filing Form
  10-Q.  No investment decisions should be based solely on this data.


DATASOURCE: Hartmarx Corporation



CONTACT:  Lisa Wells for Hartmarx Corporation, [phone]



Web Site:  http://www.hartmarx.com/ 

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