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Investors Take the Shears to Hartmarx

Investors dumped Hartmarx Corp. (HMX) shares on Sept. 29, after the Chicago clothing maker reported sharply worse third quarter earnings.

Hartmarx, whose brands include Hart Schaffner Marx, Hickey-Freeman, and Racquet Club, only earned a penny per share during the three months ended Aug. 31, compared to 18 cents during the same period of 2005. Its sales dropped to $137.7 million during the quarter compared to $152.1 million in 2005.

The news reflected "consolidation and ownership changes in the mainstream department store channel, which have significantly affected sales and earnings in our moderate priced product lines in the Men's Apparel Group segment," Homi B. Patel, chairman and chief executive officer of Hartmarx, said in a press release.

The stock plunged 12.3% to $6.75 per share on the New York Stock Exchange.

"The company's credibility is impaired as the 2006 third quarter marked a second major miss plus a guide-down," wrote Brean Murray Carret & Co. analyst Gary M. Giblen in a research note. He had expected 12 cents EPS for the quarter, while other Street estimates ranged between 15 cents and 18 cents EPS, he said. But he reiterated his buy rating on the stock, noting factors such as the company's potential as a buyout target.

Hartmarx said it will have full year sales of approximately $590 million, and diluted earnings per share in the range of 28 cents to 30 cents. This compares to the previous guidance of sales in the range of $600 to $615 million and diluted earnings per share in the range of 50 cents and 55 cents. The company says it will have earnings recovery in 2007 and plans to provide more specific guidance about that year in January.

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