Direct sales (catalog and website operations) drop at FOH

15 Dec '10

4 min read

Frederick's of Hollywood Group Inc announced financial results for its fiscal 2011 first quarter ended October 30, 2010.

Thomas Lynch, the Company's Chairman and Chief Executive Officer, stated, "Our financial results from continuing operations for the first quarter of fiscal 2011 reflect the significant progress we have made in improving the performance of our continuing retail business.

'This includes our improved gross margins as well as operating income of $127,000 as compared to an operating loss of $2.3 million for the first quarter of fiscal 2010. Shareholders' equity also dramatically increased to $10.3 million at October 30, 2010 from $2.0 million at October 24, 2009. While we are still facing many challenges associated with the macroeconomic environment, we believe the actions we have taken to transform the Frederick's of Hollywood brand into a sexy lifestyle brand have placed us on a path towards profitability."

Fiscal 2011 First Quarter Compared to Fiscal 2010 First Quarter:

• Net loss from continuing operations decreased to $297,000 from $2.6 million.
• Adjusted EBITDA from continuing operations was $1.0 million compared to a loss of $1.0 million. A reconciliation of GAAP results to Adjusted EBITDA from continuing operations, a non-GAAP measurement, is provided in the accompanying table.
• Net sales decreased 8.0% to $28.6 million from $31.1 million.
o Total store sales decreased 9.6% while comparable store sales decreased 7.0%.
o Direct sales (catalog and website operations) decreased 5.0%.
• Gross margin, as a percentage of net sales, increased to 40.0% from 35.2%.
• Selling, general and administrative expenses decreased by 14.1% to $11.3 million, or 39.6% of sales, from $13.2 million or 42.5% of sales.
• Net loss applicable to common shareholders was $1.2 million or $(0.03) per diluted share, compared to a net loss of $4.5 million or $(0.17) per diluted share.
o Net loss from discontinued operations, net of tax, decreased to $0.9 million from $1.7 million, which was primarily due to a gain on the sale of the wholesale division of approximately $1.1 million for the three months ended October 30, 2010.

Mr. Lynch continued, "The first quarter of 2011 reflects an increase in gross margin, which is attributable to a decrease in promotional activity, additional vendor allowances and reduced buying costs. Selling, general and administrative expenses were positively impacted by planned strategic reductions in headcount and changes in catalog distribution. Specifically, we are utilizing more effective and less expensive alternatives to full-sized catalogs, including targeted emails, postcards and smaller-sized, more personalized books."

"Looking ahead, our licensing business is making progress, with initial licensed products currently available on our website and in select stores, and a more extensive roll out to additional stores during Summer 2011. During the first quarter of fiscal 2011, we entered into an exclusive multi-year license agreement with Lady Sandra Home Fashions Inc. to develop, manufacture and distribute Frederick's of Hollywood branded beach towels, bedding and bath items throughout the U.S. and Canada.

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