American Apparel Inc. shrank losses in its first quarter as sales climbed in its stores, online and its wholesale business. For the three months ended March 31, the financially battered specialty retailer reported a net loss of $7.9 million, or 7 cents a diluted share, versus a loss of $20.7 million, or 28 cents, in the year-ago quarter.
This story first appeared in the May 11, 2012 issue of WWD. Subscribe Today.
Net sales were $132.7 million, up 14.3 percent from $116.1 million a year ago. Comparable-store sales were up 14 percent in the quarter and online sales were up 25 percent. Wholesale sales were up 17 percent. There was a 5 percent decrease in the number of total stores from a year ago.
Gross margin declined to 52.8 percent of sales from 54.8 percent, driven primarily by lower production volume and lower absorption of fixed overhead costs, offset by lower yarn costs.
The company posted a loss of $2.1 million before interest, taxes, depreciation and amortization on an adjusted basis, narrowing the loss from $4.9 million a year ago.
For 2012, the company confirmed guidance of adjusted EBITDA of $32 million to $40 million, based on projected sales of $570 million to $590 million and gross margins of 54 percent to 55 percent. Capital expenditures are estimated to be $15.9 million this year, with a modest number of new stores planned.
The company is seeking to improve its EBITDA performance in order to refinance its burdensome debt load, which includes $116 million owed to Lion Capital as of March and $80 million in financing it won from Crystal Financial in March.
“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,” said chief financial officer John Luttrell. “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.”