o Net loss from discontinued operations, net of tax, decreased to $1.4 million from $4.1 million.
• Adjusted EBITDA from continuing operations was a loss of $0.2 million compared to a loss of $1.4 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 9.8% to $61.2 million from $67.9 million.
o Total store sales decreased 15.0% while comparable store sales decreased 12.0%.
o Direct sales (catalog and website operations) decreased 1.0%.
• Gross margin, as a percentage of net sales, increased to 37.4% from 36.0%.
• Selling, general and administrative expenses decreased by 11.2% to $25.2 million, or 41.2% of sales, from $28.4 million or 41.8% of sales.
"Looking ahead, we remain focused on continuing to implement changes in our business strategy through our various operating initiatives, including developing our brand into a sexy lifestyle brand, partnering with strategic product licensees, exploring opportunities with international partners and evolving our customer contact strategy through both print and ecommerce," concluded Mr. Lynch.
Non-GAAP Financial Measures
For purposes of evaluating our continuing operating performance, the Company uses an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization measurement, which is computed as the net loss from continuing operations appearing on the statement of operations plus depreciation and amortization, interest, income tax expense and non-cash stock compensation expense.
Adjusted EBITDA from continuing operations is used by management to evaluate the operating performance of the Company's business for comparable periods. Adjusted EBITDA from continuing operations should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.
While Adjusted EBITDA from continuing operations is a non-GAAP measurement, management believes that it is an important indicator of operating performance because:
• Adjusted EBITDA from continuing operations excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs; and
• other significant items, while periodically affecting the Company's results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects the comparability of results.
Frederick's of Hollywood Group's mission is to create products that make women feel sexy, desirable, and confident. Our goal is to expand our presence through quality, innovation, value, and an unrelenting customer focus.
Frederick's of Hollywood Group Inc
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