Frederick's of Hollywood reports loss in fiscal Q1 2012
Frederick's of Hollywood Group Inc. announced financial results for its fiscal 2012 first quarter ended October 29, 2011.
"Throughout the first quarter of fiscal 2012 we remained focused on our objectives for the year, including improving net sales. We have seen the early benefits from this strategy over the past four months, which includes a 5.5% increase in comparable store sales for the first quarter of fiscal 2012, and a 3.3% increase for the month of November.
These improvements, along with certain other positive customer data points, have given us confidence that our initiatives are beginning to positively impact our business," stated Thomas Lynch, the Company's Chairman and Chief Executive Officer.
"We continued to expand upon programs and promotional activities aimed at increasing customer traffic to our retail stores and website. This included promotional shipping offers for online customers to stimulate sales, which led to a decrease in other revenue and negatively impacted our gross margin. "
"We also experienced a $627,000 reduction in margin assistance from our vendors in the first quarter of fiscal 2012 compared to the same period in the prior year. As expected, these activities resulted in a higher cost of sales for the quarter compared to the first quarter of fiscal 2011. We believe these promotional activities are necessary to increase customer traffic and remain competitive," concluded Mr. Lynch.
Fiscal 2012 First Quarter Compared to Fiscal 2011 First Quarter:
• Net loss was $2.3 million or $(0.06) per diluted share, compared to a net loss of $1.2 million or $(0.03) per diluted share.
a) Net loss from continuing operations increased to $2.3 million from $0.3 million.
b) There was no activity related to discontinued operations compared to a net loss of $0.9 million.
• Adjusted EBITDA from continuing operations was a loss of $1.1 million compared to an income of $1.0 million. A reconciliation of GAAP results to Adjusted EBITDA, a non-GAAP measurement, is provided in the accompanying table.
• Net sales decreased less than 1% to $28.4 million from $28.6 million.
a) Total store sales increased 3.8% to $19.1 million while comparable store sales increased 5.5% as compared to the three months ended October 30, 2010.
b) Direct sales (catalog and website operations) decreased 5.7% to $8.0 million.
c) Other revenue, consisting of shipping revenue, commissions earned on direct sell-through programs and breakage on gift cards, decreased 29% to $1.2 million.
• Gross margin, as a percentage of net sales, was 33.7% compared to 40.0%. This decrease was primarily due to an increase in product and shipping promotional offers, and a $627,000 reduction in margin assistance from our vendors.
• Selling, general and administrative expenses increased by 1.0% to $11.5 million, or 40.4% of sales, from $11.3 million or 39.6% of sales.