Lower Costs Give American Apparel Narrowed Q1 Loss

In Industry News, Reports, What's New by Jeff Prine

amapparelLos Angeles—Tighter control on costs gave American Apparel a narrowed first quarter loss that beat estimates.

For the quarter ended March 31, the Made in USA retailer posted a net loss of $5.5 million, or 5 cents a share, versus a net loss of $46.5 million, or 42 cents a share, in first quarter 2013. That was better than analysts’ average estimate expecting a loss of 20 cents a share.

‘Encouraged by Results’

Net revenue decreased 1% to $137.1 million, edging past analysts’ estimate for $136.12 million in sales. Comparable store sales fell 7% while the company’s wholesale net sales rose 7%.

“We are encouraged by our first quarter performance with our achieved results ahead of our 2014 business plan,” said Dov Charney, chief executive. “The results of our cost control efforts are being seen in all areas of the business and we are now fully focused on measures to improve top line performance.”

Gross profit was $72 million versus $72.9 million for the first quarter 2013. Gross margin decreased to 52.5% versus 52.8% a year ago primarily due a relative increase in the mix of lower-margin wholesale net sales.

Operating expense narrowed to $79.5 million from $83.3 million for the first quarter 2013. As a percent of sales, operating expenses decreased to 58% versus 60.4% last year. The decrease includes approximately $3 million in lower payroll and associated costs, advertising and marketing, and professional fees. The reductions are largely as a result of cost reduction efforts, the company said.

The retailer recently received $30.5 million in cash by selling 61 million shares including some 22 million to Swiss investment firm FiveT Capital.

American Apparel also reaffirmed its prior estimate for 2014 earnings of $40 million to $50 million.