(Filed Under Financial and General Interest News). Ending a long series of quarterly losses, Frederick’s of Hollywood Group Inc. (FOH) reported net income of “$3.3 million or $0.09 per diluted share” for the third quarter of 2012, compared to a net loss of $0.4 million or $(0.01) per diluted share for the same quarter last year.
Thomas Lynch, chairman and CEO, stated, “The positive steps that we have taken over the past two years to streamline and improve our operations have brought us closer to long term profitability. While there is still much left to accomplish, the company now has a more stable foundation upon which to build. As a result of these positive steps, we recently secured a $24 million revolving credit line, which we believe is a sign of confidence for our business from the financial markets.”
“Results for the three months ended April 28, 2012,” he continued, “reflect an improvement of approximately $3.7 million in net income. An increase in vendor allowances to share the costs of promotional activity during the period was the primary reason for this improvement. We are implementing a partner-oriented approach that will allow us to continue to share product costs with our vendors on a going forward basis. We believe this will benefit both the company and our vendors by helping push greater volume through our stores and e-commerce site, while improving our gross margins.”
“We are continuing to shed unprofitable sales, as evidenced by the recent termination of leases for three of our poorest performing stores. These three stores had an aggregate four wall cash flow loss of $630,000 for fiscal year 2011, and accounted for $378,000 of the $647,000 decrease in total store sales for the third quarter of fiscal 2012.”
“We are continually looking for ways to improve our profitability, including by re-evaluating our marketing strategy, focusing on higher margin product sales and expanding into new product categories. We recently launched our new denim collection in stores and online and expanded the availability of our shoes and ready-to-wear products into all of our retail locations. These product categories fit perfectly into our strategy to build Frederick’s of Hollywood into a complete lifestyle brand.”
According to the company announcement, “Adjusted EBITDA from continuing operations was $4.5 million compared to $1.0 million.”
During the period, “Net sales decreased 7.4% to $30.2 million from $32.6 million. Comparable store sales increased 0.7% as compared to the three months ended April 30, 2011. Total store sales decreased 3.3% to $19.0 million. Direct sales (catalog and website operations) decreased 9.2% to $9.6 million. Other revenue, consisting of shipping revenue, commissions earned on direct sell-through programs, breakage on gift cards and product sales to the company’s licensing partner in the Middle East, decreased 13.5% to $1.6 million.”
The report continued, “Gross margin, as a percentage of net sales, was 50.8% compared to 38.3%. This increase is primarily attributable to a $4.2 million increase in vendor allowances received during the three months ended April 28, 2012 as compared to the three months ended April 30, 2011. Selling, general and administrative expenses decreased by 7.3% to $11.6 million, or 38.3% of sales, from $12.5 million or 38.3% of sales.”
For the “fiscal nine months ended April 28, 2012 compared to fiscal nine months ended April 30, 2011, net loss was $2.6 million, or $(0.07) per diluted share, compared to a net loss of $4.9 million, or $(0.13) per diluted share.” The report continued, “Net loss from continuing operations decreased to $2.6 million from $3.5 million.
There was no activity related to discontinued operations compared to a net loss of $1.4 million. Adjusted EBITDA from continuing operations was $1.2 million compared to $0.8 million. “
During the period, “Net sales decreased 2.9% to $91.1 million from $93.8 million. Comparable store sales increased by 3.6% as compared to the nine months ended April 30, 2011. Total store sales increased 1.6% to $57.2 million. Direct sales decreased 6.7% to $29.7 million. Other revenue decreased 18.2% to $4.2 million. Gross margin, as a percentage of net sales, increased to 38.5% from 37.7%. This increase was attributable to a $3.5 million increase in vendor allowances for the nine months ended April 28, 2012 as compared to the nine months ended April 30, 2011, which was partially offset by higher promotions during the nine months ended April 28, 2012 as compared to the same period in the prior year. Selling, general and administrative expenses decreased by 3.8% to $36.3 million, or 39.8% of sales, from $37.7 million or 40.2% of sales.”
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