Press Release:
LOS ANGELES–(BUSINESS WIRE)– American Apparel, Inc. (NYSE Amex: APP), a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel, announced its financial results for the fourth quarter and year ended December 31, 2011. The Company also provided guidance with respect to its expected 2012 performance.
Summary of Fourth Quarter 2011 Financial Performance (4Q 2011 vs. 4Q 2010)
Comparing the 2011 fourth quarter to the corresponding period last year, the Company reported that:
Net sales increased 9% to $157.6 million on a 7% increase in comparable store sales, a 19% increase in online sales, a 6% increase in wholesale net sales and a 9% decrease in the average number of stores. In addition, total net sales increased as a result of extensive warehouse-type clearance sales conducted in the 2011 fourth quarter.
Gross margin decreased to 53.2% from 55.6% due primarily to higher raw material and manufacturing overhead costs, the effect of lower margins on warehouse clearance sales and promotional activities. Partially offsetting these reductions were the impacts of reduced shrink and lower manufacturing direct labor expense.
Operating expenses decreased $5.8 million driven by lower occupancy expenses as the result of fewer stores and lower professional fees.
Cash generated from operating activities improved by $17.1 million to $12.2 million.
Adjusted EBITDA improved by $9.6 million to $9.1 million from a previous year loss of $0.5 million.
Net loss per share was $0.11 in 2011 vs. $0.27 in 2010.
During the quarter the Company opened five retail stores and closed three to end the year with 249 stores worldwide.
The existing senior credit facility due to mature in July 2012 was replaced with a new three year senior credit facility. In addition, the second lien loan due on December 31, 2013 was extended to December 31, 2015. Accordingly, after considering the refinancing and recent operating performance improvements, the Company has concluded that there no longer is substantial doubt about its ability to operate as a going concern.
Summary of 2011 Financial Performance (2011 vs. 2010)
Net sales increased 3% to $547.3 million on flat comparable store sales, a 17% increase in online sales, a 2% increase in wholesale net sales and a 9% decrease in the average number of stores.
Gross margin increased to 53.9% from 52.5% in 2010 due to significantly improved manufacturing efficiency. The manufacturing cost improvement was partially offset by an increase in yarn and fabric costs and unit cost increases associated with factory overhead due to lower production levels.
Operating expenses decreased $11.8 million driven by lower occupancy expenses as the result of fewer stores and lower professional fees.
Cash generated from operating activities was $2.3 million, an improvement of $34.7 million.
Capital expenditures decreased $4.6 million to $11.1 million.
Adjusted EBITDA increased by $24.1 million to $14.5 million from a previous year loss of $9.6 million.
Net loss per share was $0.42 in 2011 vs. $1.21 in 2010.
Dov Charney, Chairman and CEO of American Apparel, commented, “We are pleased with our overall financial performance and significant operating improvements in 2011.
This was an important transitional year for American Apparel, one in which we achieved the following significant accomplishments:
Sequential improvements in our quarterly sales that resulted in an overall increase in total net sales despite a drop in the average number of stores in our portfolio. Net sales have also been strong in the first two months this year and comparable sales thus far in March are tracking in the +10% range.
We improved timely delivery of goods to our stores, we noticeably improved product quality and assortment and we began a process to improve in store presentation.
We aggressively began marketing to our imprintable wholesale customers and saw positive results. We introduced a new catalog, increased our direct marketing efforts and improved our product offering. So far in 2012 we are continuing to experience growth in the 20%+ range.
We drove improvements in our manufacturing costs. Our sewing costs are near historic lows and we have been consistently performing this way since the second quarter of 2011.
We began a process to reduce overall inventory levels and reduced our unit inventories by 7% in 2011.
We delivered improvements in our distribution capability and have begun a process to drive an additional $3 to $5 million in future annual distribution savings.
We closed 29 stores most of which were either underperforming or that did not fit our profile on a go-forward basis. This substantially completed our store rationalization program.
We improved financial controls, added key personnel in our finance and accounting group and expect to eliminate our remaining material control weakness in 2012.
Despite liquidity constraints, we invested in key processes and systems that will contribute to future sales and earnings growth. We now have RFID installed in 100 stores and continue to integrate our financial systems on a worldwide platform.
With our refinancing in place our focus in 2012 is to continue to drive top line sales in all channels and achieve improved efficiency in operations. Our expectation is to deliver another year of solid improvement in EBITDA performance in 2012.”
Initial 2012 Outlook
For 2012, the Company is initially projecting adjusted EBITDA to be in the range of $32 million to $40 million. The outlook assumes net sales between $552 million and $559 million and a gross profit rate between 54.5% and 55.8%. Raw material costs are estimated at current prices and foreign currency exchange rates are estimated to remain at current levels. Capital expenditures are estimated at $15.9 million for the year with a modest number of new store openings.
About American Apparel
American Apparel is a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel based in downtown Los Angeles, California. As of February 29, 2012, American Apparel had approximately 10,000 employees and operated 250 retail stores in 20 countries, including the United States, Canada, Mexico, Brazil, United Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea, and China. American Apparel also operates a leading wholesale business that supplies high quality T-shirts and other casual wear to distributors and screen printers. In addition to its retail stores and wholesale operations, American Apparel operates an online retail e-commerce website at https://www.americanapparel.net.
