American Apparel, a vertically integrated manufacturer, distributor, and retailer of branded fashion-basic apparel headquartered in Los Angeles, announced financial results for its first quarter ended March 31, 2012.
“We are pleased with our first quarter results and solid improvements across all of our businesses,” said John Luttrell, chief financial officer of American Apparel. “Our wholesale and online channels both reported record sales for the quarter, and we are highly encouraged by the continued momentum in comparable sales from our retail stores, both domestic and international. Though the first quarter is historically our slowest quarter of the year, significant sales growth and the related leveraging of fixed costs helped us meaningfully reduce our EBITDA loss. We expect key initiatives in the areas of merchandise planning, supply chain, IT systems, and inventory control to drive further sales and expense improvements for the balance of the year. Accordingly, we reiterate our adjusted EBITDA guidance of $32 to $40 million for the full year 2012.”
Comparing the first quarter 2012 to the corresponding period last year, net sales increased 14 percent to $132.7 million on a 16 percent increase in comparable store sales in the retail business, a 17 percent increase in net sales in the wholesale business and a 5 percent decrease in the average number of stores.
The following delineates the components of the increases for the quarterly period ended March 31, 2012 and March 31, 2011 as compared to the corresponding quarter of the prior year:
Comparable Store Sales
First Quarter 2012: 14%
First Quarter 2011: -8%
Comparable Online Sales
First Quarter 2012: 25%
First Quarter 2011: 27%
Comparable Store & Online
First Quarter 2012: 16%
First Quarter 2011: -5%
Wholesale Net Sales
First Quarter 2012: 17%
First Quarter 2011: -4%
Gross margin for the first quarter of 2012 was 52.8 percent versus 54.8 percent for the corresponding period last year. The decrease in gross margin was primarily driven by lower production volume that resulted in lower absorption of our fixed overhead costs, partially offset by lower yarn costs.
As a percent of revenue, operating expenses for the first quarter of 2012 decreased 590 basis points to 60.2 percent from 66.1 percent for the first quarter of 2011. The decrease was primarily due to a reduction in corporate overhead expenses and the fixed cost leverage as a result of increased sales.
Other income for the first quarter of 2012 was $2.2 million versus an expense of $7.3 million in the comparable quarter last year. The change of $9.5 million was primarily due to a gain on extinguishment of debt, offset by increased interest expense due to a higher balance of outstanding debt.
The first quarter of 2012 net loss included an income tax provision of $0.3 million versus $0.4 million in the first quarter of 2011. In accordance with U.S. GAAP, the company has discontinued recognizing potential tax benefits associated with current operating losses. As of March 31, 2012, the Company had available federal net operating loss carry forwards of approximately $75.7 million and unused Federal and State tax credits of $16.2 million.
Net loss for the first quarter of 2012 was $7.9 million, or $0.07 per common share, compared to net loss for the first quarter of 2011 of $20.7 million, or $0.28 per common share. Weighted average shares outstanding were 105.7 million in the first quarter of 2012 versus 74.1 million for the first quarter of 2011. As of May 1, 2012 there were approximately 105.9 million shares outstanding.
Consolidated Adjusted EBITDA loss narrowed to $2.1 million from a loss of $4.9 million in 2011’s first quarter. For a reconciliation of consolidated adjusted EBITDA, a non-GAAP financial measure, to consolidated net loss, please refer to the Table A attached to this press release.
For 2012, the company is reiterating its adjusted EBITDA outlook of $32 million to $40 million. This outlook assumes net sales of $570 million to $590 million and a gross profit margin of 54 percent to 55 percent. Capital expenditures are estimated at $15.9 million for 2012, with a modest number of new store openings.
For more information, visit www.americanapparel.net.
