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American Apparel net sales up in 2008
17
Mar '09
American Apparel Inc, a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel, announced its financial results for the fourth quarter of 2008 and for the year ended December 31, 2008.

American Apparel reported net sales for the quarter ended December 31, 2008 of $145.6 million, a 31.0% increase over sales of $111.2 million for the quarter ended December 31, 2007. Total retail sales increased 52.7% to $98.0 million for the fourth quarter of 2008 as compared to $64.2 million for the same period in 2007, with comparable store sales for stores open at least 12 months rising 11%.

American Apparel ended the quarter with 260 stores, having added 32 net new stores in the period. Total wholesale sales excluding online consumer sales were $36.3 million for the 2008 fourth quarter as compared to $37.3 million for the 2007 fourth quarter, a decrease of 2.8%. Online consumer sales increased 17.6% to $11.4 million in the fourth quarter of 2008 versus $9.7 million for the fourth quarter of 2007.

Gross margin for the fourth quarter of 2008 was 55.4% versus 54.0% for the prior year fourth quarter. Gross margin was favorably impacted by the growth in retail sales from expansion of the U.S. Retail, Canada and International business segments, which generate a higher gross margin than the company's U.S. Wholesale business segment.

Operating expenses for the fourth quarter of 2008 decreased to 49.1% of net sales, versus 53.4% for the fourth quarter of 2007. Pre-opening expenses for retail stores were $3.6 million in the fourth quarter of 2008, versus $1.6 million in the prior year fourth quarter.

Operating income for the fourth quarter of 2008 was $9.2 million, versus $0.6 million in the prior year fourth quarter. Operating margin for the fourth quarter of 2008 was 6.3%, versus 0.6% in the fourth quarter 2007.

Interest expense for the fourth quarter 2008 decreased to $3.6 million from $4.4 million in the fourth quarter 2007. The decrease in interest expense was due to a decrease in the LIBOR rate on which the company's floating rate debt is based.

The company's effective tax rate in the fourth quarter of 2008 was 35.1%.

Net income for the fourth quarter of 2008 was $3.9 million, or $0.05 per diluted share. Net income for the fourth quarter of 2007 was $3.0 million, or $0.06 per diluted share.

For the full year ended December 31, 2008, American Apparel reported consolidated net sales of $545.1 million, a 40.8% increase over sales of $387.0 million for the year ended December 31, 2007. Total retail sales increased 61.8% to $341.3 million for 2008 as compared to $211.0 million for 2007. At December 31, 2008, American Apparel operated 260 stores as compared to 182 stores at December 31, 2007.

Comparable store sales for stores open longer than 12 months increased 22% for the year. Total wholesale sales excluding online consumer sales for the year ended December 31, 2008 were $164.4 million as compared to $150.7 million for the year ended December 31, 2007, an increase of 9.1%. Online consumer sales increased 55% to $39.4 million for the year ended December 31, 2008 versus $25.4 million for the year ended December 31, 2007.

Gross margin for the year ended December 31, 2008 was 54.9% versus 55.7% for the year ended December 31, 2007, including the impact of a $13.2 million stock based compensation expense booked to cost of sales in 2008 related to the grant of 1.9 million shares of stock to manufacturing workers pursuant to the merger agreement between Endeavor Acquisition Corp. and American Apparel Inc.

The stock based compensation expense negatively impacted 2008 gross margin by approximately 240 basis points. Gross margin was favorably impacted by the growth in retail sales from expansion of the U.S. Retail, Canada and International business segments, which generate a higher gross margin than the company's U.S. Wholesale business segment.


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