Thursday, May 12, 2011

[news]American Apparel 1Q Loss Narrows On Margins, Online Sales Growth

May 10. 2011
From Wall Street Journal, online.wsj.com


DOW JONES NEWSWIRES

American Apparel Inc.'s (APP) first-quarter loss narrowed on expanding gross margins and rising online sales, as well as a larger income tax provision in the year-ago period, although same-store sales declined.

The casual clothing retailer, known for its risque marketing campaigns and colorful basic clothing, has struggled with liquidity woes and weak sales. Last month, the company managed to raise $14.9 million in rescue financing from a group of investors allowing it to meet obligations to its lenders.

On Tuesday, American Apparel said same-store sales in the latest quarter dropped 7.9%, although online sales grew 28%. The company said same-store sales were essentially flat so far in the current quarter, and it still expects to achieve growth on that basis for the full year.

"Our first quarter financial results demonstrate early signs of recovery," said Chairman and Chief Executive Dov Charney. He added the company's inventory was well positioned for American Apparel's key selling season, which runs from May through October.

For the latest quarter, American Apparel reported a loss of $20.7 million, or 28 cents a share, compared with a prior-year loss of $42.8 million, or 60 cents a share. Net sales dropped 4.7% to $116.1 million.

Gross margin widened to 55.1% from 50.4% due to improved production efficiency, which began in the second half of last year. And while yarn and fabric costs grew, American Apparel raised average unit retail prices to mitigate the increases.

Shares rose 2 cents, or 1.6% to $1.30 in after-hours trading Tuesday after closing up 4.9%, or 6 cents, to $1.28.

--By John Kell, Dow Jones Newswires; 212-416-2480; john.kell@dowjones.com

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