A noncash item drove losses deeper at American Apparel Inc. in the first quarter ended March 31, historically the company’s weakest earnings period. The Los Angeles-based vertical retailer posted a net loss of $46.5 million, or 42 cents a diluted share, compared with a net loss of $7.9 million, or 7 cents, in the year-ago quarter.
Net sales in the quarter increased 4.1 percent to $138.1 million, up from $132.7 million a year ago. Comparable-store sales improved 8 percent, including e-commerce, and wholesale sales inched up 1 percent.
American Apparel booked a noncash charge of $23.6 million in the quarter in connection with an increase in the fair value of the 21.6 million outstanding warrants that former lender Lion Capital retains at 75 cents a share. As the company’s share price increases, as it did during the period, the value of the warrants rises and American Apparel books an expense to recognize the increase. RELATED STORY: American Apparel Refinances With Private Bond Offering >>
The company emphasized the charges do not impact the company’s operating performance and do not represent a cash obligation, as the warrants will reclassify to equity once exercised. American Apparel shares closed up 2 cents at $2.02 on Wednesday.
“We have significantly improved our store presentation, responsibly added stores when it was appropriate to do so, improved technology in all three channels, increased inventory productivity and substantially improved the effectiveness of our supply chain operation,” said Dov Charney, chairman and chief executive officer of American Apparel.
Adjusted earnings before interest, taxes, depreciation and amortization amounted to a loss of $700,000 compared with a loss of $2.1 million a year ago. Chief financial officer John Luttrell said the losses were in line with plan, and the company reiterated its full-year EBITDA guidance of $47 million to $54 million for the full year, which assumes net sales between $652 million and $660 million.
“We expect key initiatives in the areas of merchandise planning, supply chain and inventory control to drive further sales and expense improvements for the balance of the year,” said Luttrell.
Gross margin in the first quarter remained unchanged at 52.8 percent from a year ago. Operating expenses increased 4 percent to $83.3 million, related to higher share-based compensation, higher rent expenses and higher radio frequency identification supplies. These were offset by lower store payroll expenses and lower advertising expenditures.
As of May 1, the company operated 248 stores in 20 countries.
In April, American Apparel closed a private bond offering of $206 million and entered into a new $35 million, five-year revolving credit facility with Capital One Bank. The new financing allowed American Apparel to repay and terminate its prior high-interest credit facilities with Lion Capital LLC and Crystal Financial LLC.
“Despite some liquidity challenges over the past two years, we have made the necessary investments that should allow us to exceed our prior EBITDA levels,” said Charney.
@kering_official is spinning off its stake in puma in an effort to focus on its luxury brands, the brand operator announced yesterday. “We are proud to have supported the turnaround of Puma, which now has unrivaled capabilities to take full advantage of the specific dynamics of its global markets and is poised to achieve substantial growth,” said François-Henri Pinault, Kering’s chief executive officer and chairman. Artémis will become a “long-term strategic shareholder” of Puma with a 29 percent stake. #wwdnews #wwdfashion (📷: @jilliansollazzo)
The fashion world mourns for celebrated street style photographer, Nabile Quenum, who died at age 32 in Paris.
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“I’m Russian and I love to use all these little tricks that I got from my grandma or my mom. We didn’t have a lot of money for creams or anything like that so we would use a garden as a beauty treatment regime. We’d put cucumber in the fridge and do a cucumber mask,” says model @irinashayk on one of her beauty hacks. WWD asked celebs what their go-to self-care rituals are. See what Naomie Harris, Freida Pinto and more said on WWD.com. #wwdeye #wwdbeauty (📷: @zefashioninsider)
Exclusive: @viktorandrolf are teaming up with @Zalando on a collection made from leftover clothing. The lineup, which lands at the retailer February 1, includes 17 pieces adorned with sliced up and repurposed overstock from the retailer’s private label collection. Pictured here is a look from the collection –– see more on WWD.com. #wwdfashion #wwdnews
@duewestnyc is the newest bar joining the collection of intimate neighborhood-focused spaces in the West Village. The cocktail menu, which includes bitters and syrups made in-house, offers a “Build Your Own Old-Fashioned” – like the one pictured here – where guests can choose from a list of spirits and unexpected sugars and bitters. #wwdeye
Spotted at last night’s National Board of Review gala in NYC: Angelina Jolie. Jolie – along with Meryl Streep, @lupitanyongo and more – continued the all-black dress code from Sunday’s Golden Globes. #wwdeye (📷: @lexieblacklock)