Secaucus, NJ—Although Syms reported Friday a first quarter profit–a turnaround from last year–its sales decline, however, prompted a postponement of its annual meetings and a report the off-price retailer may be up for sale.
Net income for the first quarter was $1.5 million or 10 cents a share, compared to net loss of $0.8 million or 6 cents per share in the first quarter 2010.
But the profit resulted mostly from cost cutting instead of increased sales. In fact, net sales decreased by 13% to $105.4 million from $121.4 million in the comparable period last year. Operating expenses for the quarter was lowered to $41.6 million from $55.0 million last year.
Investor Files Suit
Over the weekend Syms make several announcements. First, Seth Udasin had resigned as chief financial officer for personal reasons. Then, in a separate announcement, Syms said it has switched the date of this year’s annual shareholder meeting to July 29 from Aug. 5.
The company also investment bank Rothschild to explore a sale of the company.
According to The New York Post, Syms was sued last week by one of its investors, Esopus Creek Advisors, which complained that an Aug. 5 meeting would violate corporate law in New Jersey, which requires that annual meetings be no more than 13 months apart. Syms held its annual meeting last year on June 29. Claiming Syms executives are “running the company [into] the ground and ignoring shareholders’ rights.’’ Esopus Creek also demanded to see the company’s records, books and minutes since Jan. 1, 2009.
Among other charges, Esopus Creek charges Syms is “failing to make progress integrating Filene’s Basement effectively, and continues to hemorrhage cash, yet recently signed several additional store leases, including the most expensive lease in the company’s history.’’
A spokeswoman for Syms said the lawsuit “has no merit whatsoever and we will fight it vigorously.’’
American Apparel Reports Flat Q2
Los Angeles—After a series of discouraging earnings reports in the last year, American Apparel Inc. reported last week a bright spot in its earnings.
Following several quarters of declines, the company said its sales were flat in its second quarter compared with the same period a year earlier.
The company also said online sales rose 19% and wholesale sales declined 4%. Total sales were $132 million.
Dov Charney, chairman, said he was pleased with the company’s recent sales momentum. For the month of June, the company saw a 3% increase in sales at stores open at least a year. “On an average US dollar basis we experienced a 9% increase. Approximately 40% of our stores are located outside the United States.
“With a continued emphasis on improving manufacturing efficiency, and despite the effect of cotton price increases, we believe ours will be a story of improving sales,” Charney said. “Our focus will be to optimize product mix in stores, the in-store customer experience and the overall profitability of our store base.”
In April, American Apparel announced it received $14.2 million in new capital from a group of private investors led by Canadian financier Michael Serruya and Delavaco Capital. This investment helped stabilize our capital structure and created positive sales momentum through prudent investments in product, Charney said.
Ordered to Pay $343,000 To Employee In Racial Slur Case
Meanwhile, American Apparel, which is already facing a series of sexual harassment suits targeted against Charney, was ordered to pay $343,000 last week for an alleged racial slur against employee Christopher Renfro, who sued the retailer in 2008.
According to Renfro’s attorney Barbara Figari said her client was repeated called the “n-word” by Sean Alonso, a supervisor who answers to Charney.
The arbitrator in the case found that Alonzo subjected Renfro to severe racial harassment and “ordered American Apparel to pay $342,919.95 for damages, costs and attorney’s fees.”
American Apparel’s attorneys argued that although Alonzo admitted to using the word, he insisted that he was only singing the lyrics to a rap song.
American Apparel’s chief counsel Joyce Crucillo pointed out while Renfro originally sued the company for more than $1,000,000 in damages, he was granted only $32,500 with the rest of the award going to Renfro’s attorneys.