American Apparel Reports Q3 Sales Gains

Net Sales Increased 15%

American ApparelCounselor Top 40 supplier American Apparel (asi/35297) announced third quarter sales results last week that continued positive revenue gains experienced in recent quarters. Comparing the third quarter of 2012 to the corresponding period last year, net sales increased 15% to $162.2 million on a 20% increase in comparable store sales in the retail business, a 6% increase in net sales in the wholesale business, and a 1% increase in the average number of stores. Gross profit margin shot up 14% to $85.2 million.

Said American Apparel CEO Dov Charney: "We are pleased with our third quarter results that again show solid growth and continuing momentum in all business segments and major geographies. Significant sales growth allowed us to more than double our EBITDA performance to $13 million for the third quarter of 2012 from $6 million for the third quarter of 2011. Year-to-date our EBITDA performance has improved to $19 million from $5 million for the corresponding period last year. EBITDA performance for the 12 months ended September 30, 2012 was $28 million or double that reported for the full year in 2011."

While the gains were impressive, American Apparel reported a $19 million – $0.18 per common share – net loss for the third quarter of 2012, compared to a net loss for the third quarter of 2011 of $7.2 million or $0.07 per common share. In a statement, the supplier said: "The 2012 third quarter net loss and net loss per common share includes $13.3 million of expense ($0.13 per common share) associated with a non-cash charge for an increase in the fair value of outstanding warrants. The 2011 third quarter includes an income statement credit of $6.1 million ($0.06 per common share) for a non-cash reduction in the fair value of the same warrant liability."

According to American Apparel, margin rate decreased from 53.2% in the third quarter of 2011 to 52.5% in the third quarter of 2012. The gross margin reduction was due to planned promotional activities, the effect of clearance sales as a part of an inventory reduction strategy, and the negative impact of the strengthening U.S. dollar on margins from the supplier's international segment. These impacts were partially offset by a shift to higher margin retail sales in the 2012 third quarter, lower inventory shrink reserves, and reduced manufacturing costs.