Comparable store sales for the Los Angeles-based apparel firm fell 7% in Q1, but the decrease was tempered by a 7% increase in wholesale net sales – which include revenues within the ad specialty industry. In last year's first quarter, American Apparel recorded only a 1% increase in wholesale net sales.
Despite a soft retail start to 2014, American Apparel CEO Dov Charney remained optimistic in the company's earnings release, citing a 5% decrease in operating expenses. "We are encouraged by our first-quarter performance with our achieved results ahead of our 2014 business plan,” he said. "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.”
American Apparel's gross profit declined 1% to a total of $72 million and gross margin fell 0.3%, a decrease attributed to a relative increase in the mix of lower-margin wholesale net sales. Adjusted EBITDA improved by $2.1 million to $1.4 million compared to a slight loss for the first quarter of 2013.
Beyond its financials, American Apparel has continued to make headlines this year for several reasons. In March, Swiss equity firm FiveT Capital AG bought more than 61 million shares of stock in the supplier when American Apparel faced a cash crunch. The moved raised in excess of $30 million and made FiveT American Apparel's largest outside investor.
Then, just last week, American Apparel settled a U.S. Federal Trade Commission (FTC) case that accused the company of making false data privacy claims. The FTC said the supplier deceived customers by claiming it complied with a U.S.-European Union program that facilitates customer data movement between the two continents. "No customer was harmed in any way during the brief period when the company's annual certification unintentionally lapsed but the company's website indicated it was current,” said Peter Schey, a lawyer for American Apparel, in a statement.