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

Share Name	Share Symbol	Market	Type
Martmarx Corp.	NYSE:HMX	NYSE	Ordinary Share

Hartmarx (NYSE:HMX)
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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, +1-212-826-3529 Web Site: http://www.hartmarx.com/

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HMX Martmarx Corp.