Sales up 13% at American Apparel in Q2

Dov Charney, Chairman and CEO of American Apparel, Inc. stated, "We are pleased with our second quarter results that again show solid growth and continuing momentum in all business segments and major geographies. Though the first two quarters are historically our slowest, significant sales growth allowed us to more than double our EBITDA performance to $7.6 million in the second quarter of 2012 from $3.7 million in the second quarter of 2011.

“In the second quarter we saw over 30% of our stores with sales growth in excess of 20% and as we continue to scale our operations and further implement store-level improvements, we believe we can raise the overall sales performance even further."

Some of the more significant tactics the Company is employing to improve sales and profitability include:

• Implementation of tighter inventory management systems through the RFID program. Approximately half of the stores are still to have RFID implemented.
• Continued store renovations to improve presentation and sales per square foot, with approximately 70 stores remaining to be renovated.
• Installation of traffic counters remaining to be completed in over half of stores to improve customer conversions. Full implementation of this technology is expected to be completed in 2013.
• The process to build a new distribution center infrastructure is underway and will improve the speed and accuracy of shipments to stores and will also significantly reduce operating expenses. Completion of this project is expected by early 2013.

Although these programs have a short-term cost, their completion will allow for further growth in sales and profit margins that fall in line with the industry. As EBITDA approaches the range indicated in the current outlook, the Company believes it will be in a position to refinance its high cost debt and it plans to do so in late 2012 or early 2013.

The Company has reported double digit comparable store sales growth each month since November of 2011. For the month of August, the Company expects that comparable store sales will increase in the upper teen to low twenty percent range and it estimates the percent increase in net sales will be in the 10% to 15% range versus the prior year.

Accordingly, the Company is raising its adjusted EBITDA guidance for 2012 to between $36 to $44 million from the prior estimate of $32 to $40 million.

Operating Results

Comparing the second quarter 2012 to the corresponding period last year, net sales increased 13% to $149.5 million on a 14% increase in comparable store sales in the retail business, a 10% increase in net sales in the wholesale business and a 2% decrease in the average number of stores.