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Lower retail store sales at Frederick's of Hollywood
15 Mar '11
5 min read
Frederick's of Hollywood Group Inc announced financial results for its fiscal 2011 second quarter ended January 29, 2011.
Thomas Lynch, the Company's Chairman and Chief Executive Officer, stated, "Although we are disappointed with our lower retail store sales, we continue to make significant progress in improving our overall retail business. We primarily attribute these lower sales to late deliveries of merchandise, which resulted from credit limits imposed by certain of our vendors prior to the sale of our wholesale division.
“These late deliveries, coupled with our conservative expectations for the holiday season, resulted in lower than optimal inventory levels. Due to our improved financial condition following the sale of the wholesale division, our vendors have increased the credit limits that they offer us, which we believe will result in timely product deliveries going forward."
Mr. Lynch continued, "The product and design choices made by our merchandising and design team that was in place in fiscal year 2010 also contributed to the sales decrease. In conjunction with our strategic decision to focus solely on our core retail operations, we reorganized our merchandising team, which is now led by our new Senior Vice President of Merchandising. As merchandise is ordered well in advance of the applicable selling season, we believe that we will begin to see the new team's impact on our product assortment commencing in the fourth quarter of fiscal year 2011."
Fiscal 2011 Second Quarter Compared to Fiscal 2010 Second Quarter:
• Net loss applicable to common shareholders was $3.3 million or $(0.08) per diluted share, compared to a net loss of $4.9 million or $(0.18) per diluted share.
o Net loss from continuing operations increased to $2.8 million from $2.3 million.
o Net loss from discontinued operations, net of tax, decreased to $460,000 from $2.4 million.
• Adjusted EBITDA from continuing operations was a loss of $1.3 million compared to a loss of $0.4 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 11.3% to $32.6 million from $36.7 million.
o Total store sales decreased 19.8% while comparable store sales decreased 16.5%.
o Direct sales (catalog and website operations) increased 2.2%.
• Gross margin, as a percentage of net sales, decreased to 35.0% from 36.7%.
• Selling, general and administrative expenses decreased by 8.6% to $13.8 million, or 42.5% of sales, from $15.1 million or 41.2% of sales.
Fiscal Six Months Ended January 29, 2011 Compared to Fiscal Six Months Ended January 23, 2010:
• Net loss applicable to common shareholders was $4.5 million, or ($0.12) per diluted share, compared to a net loss of $9.3 million, or ($0.35) per diluted share.
o Net loss from continuing operations decreased to $3.1 million from $4.9 million.
Thomas Lynch, the Company's Chairman and Chief Executive Officer, stated, "Although we are disappointed with our lower retail store sales, we continue to make significant progress in improving our overall retail business. We primarily attribute these lower sales to late deliveries of merchandise, which resulted from credit limits imposed by certain of our vendors prior to the sale of our wholesale division.
“These late deliveries, coupled with our conservative expectations for the holiday season, resulted in lower than optimal inventory levels. Due to our improved financial condition following the sale of the wholesale division, our vendors have increased the credit limits that they offer us, which we believe will result in timely product deliveries going forward."
Mr. Lynch continued, "The product and design choices made by our merchandising and design team that was in place in fiscal year 2010 also contributed to the sales decrease. In conjunction with our strategic decision to focus solely on our core retail operations, we reorganized our merchandising team, which is now led by our new Senior Vice President of Merchandising. As merchandise is ordered well in advance of the applicable selling season, we believe that we will begin to see the new team's impact on our product assortment commencing in the fourth quarter of fiscal year 2011."
Fiscal 2011 Second Quarter Compared to Fiscal 2010 Second Quarter:
• Net loss applicable to common shareholders was $3.3 million or $(0.08) per diluted share, compared to a net loss of $4.9 million or $(0.18) per diluted share.
o Net loss from continuing operations increased to $2.8 million from $2.3 million.
o Net loss from discontinued operations, net of tax, decreased to $460,000 from $2.4 million.
• Adjusted EBITDA from continuing operations was a loss of $1.3 million compared to a loss of $0.4 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 11.3% to $32.6 million from $36.7 million.
o Total store sales decreased 19.8% while comparable store sales decreased 16.5%.
o Direct sales (catalog and website operations) increased 2.2%.
• Gross margin, as a percentage of net sales, decreased to 35.0% from 36.7%.
• Selling, general and administrative expenses decreased by 8.6% to $13.8 million, or 42.5% of sales, from $15.1 million or 41.2% of sales.
Fiscal Six Months Ended January 29, 2011 Compared to Fiscal Six Months Ended January 23, 2010:
• Net loss applicable to common shareholders was $4.5 million, or ($0.12) per diluted share, compared to a net loss of $9.3 million, or ($0.35) per diluted share.
o Net loss from continuing operations decreased to $3.1 million from $4.9 million.
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