American Apparel Inc. posted a second-quarter net loss of $15.3 million, or 14 cents a diluted share, for the three months ended June 30, compared with a net loss of $213,000 in the year-ago quarter. Net sales increased 12.5 percent to $149.5 million, up from $132.8 million.
The widening loss was largely attributable to a decrease in the value of warrants held by American Apparel that are tied to its stock price. The shift meant other expenses increased in the quarter to $13.4 million versus other income of $5.5 million a year ago.
American Apparel’s stock price closed at $1, down 4 cents, on Tuesday.
The healthy sales growth in the quarter helped American Apparel grow adjusted earnings before interest, taxes, depreciation and amortization to $7.6 million from $3.7 million in the year-ago quarter. The company raised its adjusted EBITDA guidance range for the year to $36 million to $44 million, up from the prior estimate of $32 million to $40 million. The outlook assumes net sales of $604 million to $611 million and a gross profit margin of 53 percent to 54 percent.
Interest expense was $10.3 million in the quarter, up from $7.8 million a year ago, as the company’s debt continued to balloon and some of it became more expensive under terms of a new asset-based loan with Crystal Financial inked in March. American Apparel currently owes London-based Lion Capital about $125 million in long-term debt and Crystal Financial most of $74.8 million in a revolving credit facility, said John Luttrell, the company’s chief financial officer.
American Apparel is seeking to improve its EBITDA performance in order to refinance its debt load on better terms. Luttrell said the company is on track to be able to renegotiate its loans by the first quarter of 2013, which would improve its financial outlook.
“Though the first two quarters are historically our slowest, significant sales growth allowed us to more than double our EBITDA performance,” said Dov Charney, chairman and chief executive officer of American Apparel. “We saw over 30 percent of our stores with sales growth in excess of 20 percent and, as we continue to scale our operations and further implement store-level improvements, we believe we can raise the overall sales performance even further.”
Same-store sales in American Apparel’s retail stores grew 14 percent in the quarter, online sales jumped 28 percent and wholesale sales improved 10 percent. The company currently operates 251 stores in 20 countries.
Gross margin decreased to 53 percent of sales, from 55 percent in the year-ago quarter, due to planned promotional activity, which included warehouse clearance sales aimed at reducing inventory. The strengthening U.S. dollar also negatively impacted margins on international sales.
The company is in the process of moving its distribution facility out of its Los Angeles headquarters complex into a more efficient rented facility in La Mirada, Calif., by early 2013, which will improve the speed and accuracy of shipments to its stores, said Luttrell.
For the six months, net losses were $23.2 million, or 22 cents a diluted share, compared to a net loss of $21 million, or 26 cents, in the year-ago period. Net sales for the six months was $282.1 million, up 13.4 percent from $248.9 million.
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