Strong sales growth in Sweet Nothings brand – Maidenform
Total retail segment net sales increased $0.4 million, or 3.7%, to $11.3 million in the first quarter of 2010 with same store sales, defined as stores that have been open for more than one year, increasing 6.3% at Maidenform's retail outlet stores. This increase was a result of increased customer traffic with solid performances from the Company's bra and shapewear businesses. Internet sales decreased $0.1 million to $1.2 million in the first quarter of 2010. The retail segment operated 75 and 77 outlet stores as of the first quarter of 2010 and 2009, respectively.
Consolidated gross profit increased $15.4 million, or 42.2%, to $51.9 million in the first quarter of 2010. As a percentage of net sales, consolidated gross margins were 36.3% in the first quarter of 2010 versus 32.0% in the first quarter of 2009. The majority of the increase was a result of customer and product mix, lower overall promotional activity and the benefit from product cost reduction efforts.
Consolidated selling, general and administrative expenses (SG&A) increased $5.3 million, or 20.5%, to $31.2 million in the first quarter of 2010 primarily as a result of increased payroll and related benefits associated with incentive compensation, 2010 merit increases, which the Company did not incur in 2009, the filling of new positions to support the Company's initiatives, and the impairment of an intangible asset for which the Company determined had no future benefit. As a percentage of net sales, SG&A declined 90 basis points to 21.8% in the first quarter of 2010 compared to 22.7% in the first quarter of 2009 due to sales leveraging.
Due to all of the factors described above, operating income in the first quarter of 2010 was $20.7 million, or 14.5% of net sales, compared to $10.6 million, or 9.3% of net sales, in the first quarter of 2009.
Net interest expense in the first quarter of 2010 was $0.3 million compared to $0.7 million in the first quarter of 2009 as the Company benefited primarily from lower average interest rates and lower average debt outstanding for the first quarter of 2010 as compared to the same period in 2009.
The Company's effective income tax rate for the first quarter of 2010 was 40.7% compared to 39.4% in the first quarter of 2009. The higher effective income tax rate in the first quarter of 2010 was largely a result of non-deductable expenses in connection with the sale of Maidenform's common stock by one of its stockholders.
Net income for the first quarter of 2010 and 2009 was $12.1 million and $6.0 million, respectively, and EPS was $0.51 and $0.26, respectively.
Financial Performance Guidance for 2010:
Second Quarter Outlook:
• Net sales for the second quarter are expected to increase in the low-to-mid 20 percent range as compared to the prior year
• Gross margin rates are anticipated to be in the mid-30 percent range
• EPS is expected to be in the range of $0.45 to $0.50 versus $0.31 in the second quarter of 2009
Full Year Trend:
• Net sales are expected to increase in the mid-teens percentage range for the year, with mid-single digit percentage increases in the second half that include an estimated $15.0 million reduction in sales in the other channel
• Gross margin rates are anticipated to be in the mid-30 percentage range
• EPS is expected to be in the range of $1.75 - $1.80