By  on March 10, 2009

Frederick’s of Hollywood Group Inc. posted widened losses for the second quarter and six months due mostly to a goodwill impairment charge.

For the three months ended Jan. 24, the loss was $20.2 million, or 77 cents a share, compared with a loss of $2.4 million, or 20 cents, in the year-ago period. Excluding a $19.1 million noncash impairment charge, the loss would have narrowed to $1.1 million, or 4 cents a share.

Frederick’s of Hollywood Group merged in January 2008 with FOH Holdings Inc., the parent company of Frederick’s of Hollywood, which simultaneously merged with Movie Star Inc. Results from a year ago are from FOH Holdings only and don’t include those of Movie Star.

With the addition of Movie Star’s wholesale operations, sales jumped 24.7 percent to $52.5 million from $42.1 million. Wholesale contributed $14.2 million to revenues, partially offset by a $3.8 million decrease in retail sales. Thomas Rende, chief financial officer, said comparable-store sales fell 7.2 percent in the quarter.
Gross profits in the quarter were up 9.3 percent to $18.3 million from $16.7 million. Gross margins, as a percentage of sales, fell to 34.8 percent from 39.7 percent last year, hurt in part by lower gross margin in the wholesale division.

Selling, general and administrative expenses grew to $18.8 million in the quarter from $18.5 million a year ago, with $14.2 million in costs attributable to the retail component and $4.6 million allocated to the wholesale operation and corporate office following the merger. The retail segment’s SG&A decreased by over 20 percent, said Rende.

When viewed on an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) basis, the company posted a profit in the quarter of $1.3 million against a loss of $590,000 in the year-ago quarter.
For the six months, the loss rose to $25.5 million, or 97 cents a share, from a loss of $6.3 million, or 54 cents, a year ago. Excluding the impairment charge, the loss was $6.4 million, or 24 cents a share. Sales gained 19.9 percent to $95.1 million from $79.3 million.

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