American Apparel Inc. late Tuesday issued preliminary results for the second quarter and first half in which it reported smaller losses despite lower margins.
In the three months ended June 30, the Los Angeles-based vertical retailer had a net loss of $15 million, or about 9 cents per diluted share, below the $38 million, or 34-cent, loss registered during the second quarter of 2013. Income from operations swung to a profit of about $4 million from a loss of $2 million in the comparable period last year. Operating expenses declined 8.1 percent to an estimated $79 million, or 48.8 percent of sales, from about $86 million, or 53.1 percent, in the prior-year period.
Net sales were essentially unchanged at $162 million for both the 2014 and 2013 periods, with gross profit of $82 million, about 50.6 percent of net sales, down from a gross margin of 51.9 percent in the year-earlier period. The company didn’t report sales on a comparable or same-store basis.
The embattled firm, from which Dov Charney was suspended as chief executive officer, filed the estimated results with the Securities and Exchange Commission because it missed the filling deadline for its quarterly report, saying its “new board needs additional time to review the financials and ask questions of management before the company is in a position to finalize” its results for the quarter and half.
Last month, the company reconstituted its board, naming David Glazek, Thomas Sullivan, Colleen Brown and Joseph Magnacca directors. Glazek and Sullivan were designated by Standard General, the hedge fund that has the option to designate an additional director. Cochairmen Allan Mayer and David Danziger are the only previous directors to remain on the board.
After lending Charney $20 million to buy shares and then taking control of the new shares and those previously owned by Charney, Standard General controls 44 percent of American Apparel’s common stock.
The new board is responsible for forming a special committee that will conduct the probe into the conduct of Charney and decide whether he should be reinstated as the company’s ceo or be permitted to serve with the company in some other capacity.
American Apparel said that, as of June 30, it had $10 million in cash and $17 million of availability for additional borrowings under its Capital One credit facility. As of Aug. 1, it reported $23 million of availability for additional borrowings under the Capital One arrangement.
For the six months, the net loss fell by three-quarters to $21 million, or 14 cents a diluted share, from a loss of $84 million, or 76 cents, in the first half of last year. Sales fell 0.3 percent to $299 million from $300 million while gross margin dropped to 51.5 percent of sales from 52.3 percent.
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