WestPoint Home Losses Mount

New York — Sales in 2007 at WestPoint Home are down by one-fifth from 2006, and operating losses are approaching $100 million, six months into the year. However, WestPoint's owners, led by financier Carl Icahn, said they are confident that WestPoint "will end 2007 as a stronger company."

Icahn, meanwhile, engineered the merger of WestPoint parent American Real Estate Partners (AREP) with his main investment business, and AREP will henceforth operate as Icahn Enterprises, with Icahn serving as chairman. The nature of the company has been altered strongly toward the "money management business," as Icahn said during last week's second-quarter earnings call.

With hedge fund asset management as the main line of business — the casino and the oil and gas holdings have been or are being sold off — that leaves real estate and home fashion as relatively minor interests.

WestPoint Home saw second-quarter 2007 sales volume drop 30.1% from the year-ago level to $165.8 million, a much faster decline than the year-to-date, six-month drop of 21.7% to $376.4 million, the company reported.

The WestPoint Home second-quarter operating loss of $53.0 million represented a 9.6% broader loss than for the same period last year — again a steeper drop than the six-months loss of $92.0 million, which was a 6.6% greater loss than last year.

There were some positive signs. By slashing white collar jobs, closing facilities in Georgia and Alabama, and shifting production to such low-cost territories as Bahrain and Pakistan, WestPoint has begun to show some expense reduction. Icahn's executive team reported that SG&A was reduced to $34.3 million for the second quarter, down from nearly $40 million one year ago.

AREP — now Icahn Enterprises — reported an overall second-quarter 2007 net loss of $25.5 million, compared to net earnings of $79.1 million for the same period one year ago. Quarterly revenues of $191.4 million were down 33.0% from $285.4 million last year. That steep cut in revenue was, the company noted, "due to reduced home fashion and real estate revenues."

The company noted that WestPoint ended the quarter with $115.4 million of unrestricted cash and a $250 million working capital facility.

As a whole, Icahn Enterprises now manages about $7 billion in funds, including $1.8 billion of Icahn's own capital.