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Tropical sees better future

The Tampa apparelmaker predicts a good year even as its stock hits a 52-week low.

As his company's stock price slumped to a 52-week low, Tropical Sportswear Int'l Corp. CEO Bill Compton gave a pep talk to shareholders Wednesday.

"The entire apparel industry is suffering today, and we've been hurt because of that," Compton said at the Tampa-based casual pants manufacturer's annual meeting. "We see a very good year coming. This will be a great time for us to take business away from competitors."

Whether Wall Street sees it the same way is another matter. Tropical's stock has lost 66 percent of its value in the past year and hit a 52-week low of $11.87{ Wednesday before closing at $12.81\, down 18} cents.

Most of the apparel industry has fallen out of favor with investors. Over the past two years, price deflation set in as average prices slipped more than 1 percent. That's made it tougher for apparel manufacturers to post big sales and profit gains. Meanwhile, the Federal Reserve Bank seems determined to slow the economy, which might rein in consumer spending after a record-breaking holiday season.

Tropical's problems also can be attributed to its profit margins. In 1997, the company earned 5.5 cents on every dollar of sales. In 1999, it earned only 2 cents.

As a group, apparel stocks have been trading at a price/earnings multiple of 12.8, less than half the price of the market as a whole. Even such hot menswear labels as Ralph Lauren and Tommy Hilfiger have not escaped, dropping to stock prices that are 10.6 and 6.1 times earnings respectively. Tropical was trading at a multiple of 5.5 times earnings Wednesday.

Compton's formula has worked for Tropical before. By being fast and efficient, the company can cater to department store demands for private-label goods by delivering within 32 days of an order being placed. That's about three months faster than most competitors. The company's brand-name pants and shorts _ Savane and Farah _ also have picked up steam as an alternative to Haggar and Levi's Dockers. Tropical is slated to increase its 1,100 Farah Shops in Wal-Mart Stores by 500 in August.

Tropical stumbled in 1999 after a new computer system was installed but failed to work properly. Tropical ended up getting a $4-million settlement from the German vendor but had to absorb a $4-million charge. Then, in the third quarter, the company's distribution center expansion in Tampa slowed deliveries as shipments had to be routed around the construction project.

"That's all behind us now," Compton said, noting that Tropical has three times as much storage capacity as it did before the construction project.

Tropical plans to try installing another new computer system this year. Officials say this time they are buying a system that has been successfully used by other apparelmakers.

One shareholder questioned why Tropical was spending so much on a lavish, full-color annual report given its recent performance.

"It's a very fancy report, but I would have preferred something done in black and white and a dividend," said Dan Hillen, a shareholder from Homosassa in Citrus County.