American Apparel Q2 sales up 9%

Financial Performance Highlights for the Second Quarter 2013

- Net sales increased 9% to $162.2 million on a 7% increase in comparable store sales and a 16% increase in wholesale net sales

- Adjusted EBITDA improved by $0.3 million to $7.9 million from $7.6 million in the second quarter 2012

- The Company is updating its 2013 Adjusted EBITDA outlook to a range of $46 million to $51 million

John Luttrell, Chief Financial Officer of American Apparel, Inc. stated, "Today we reported Adjusted EBITDA of $7.9 million vs. $7.6 million reported in the second quarter of 2012.

"We saw a healthy increase in sales across all three business channels, but our second quarter Adjusted EBITDA performance was negatively affected by approximately $2.9 million of costs associated with the transition to a new distribution center and other performance measures we took to improve our distribution operations.

"As a result, we have adjusted our outlook for the year to reflect these factors and now estimate Adjusted EBITDA to be in the range of $46 million to $51 million as compared to our prior estimate of $47 million to $54 million."

Dov Charney, Chairman and CEO of American Apparel, Inc. stated: "We are pleased with the continued strong sales performance in all three business channels, particularly in light of the sales we believe we lost as a result of the supply chain issues we faced this quarter. We are, however, executing at the store level and in our manufacturing facility, and customer demand of our offering remains strong.

"While the transition to a new distribution center and other supply chain initiatives negatively impacted the quarter, we are committed to making the necessary investments to reduce costs and improve our operating efficiency over the longer-term. These initiatives will strengthen our supply chain and better position us to achieve our long-term objective of a double-digit EBITDA margin. Finally, for the first week of August we have seen positive comparable store sales momentum in our stores."

Changes in Supply Chain Operation

During the second quarter, we implemented several supply chain initiatives designed to reduce costs and improve distribution over the longer-term. These initiatives include the following: i) we are currently in the process of transitioning our distribution activities to an automated facility located in La Mirada, California, ii) we closed our distribution center in Montreal, Canada and, iii) we closed an ancillary warehouse location in Los Angeles, CA.

These activities are scheduled to be complete in the third quarter of 2013, and have resulted in additional costs charged to cost of sales and selling expenses in our statements of operations for both the second quarter and first six months of 2013. In addition, we believe resulting shipping disruptions to both our stores and customers may have negatively impacted sales.

American Apparel