Frederick's of Hollywood reports fiscal Q3 & nine months results

10 Jun '09

5 min read

Gross margin, as a percentage of sales, decreased to 35.8% for the nine months ended April 25, 2009 from 38.5% for the nine months ended April 26, 2008. The decrease was due to a lower gross margin for both the retail and wholesale divisions of 38.8% and 25.3% for the nine months ended April 25, 2009, respectively, as compared to 40.2% and 28.4% for the nine months ended April 26, 2008.

For the nine months ended April 25, 2009, selling, general and administrative expenses decreased by $2,877,000 to $57,646,000, or 40.6% of sales, from $60,523,000, or 43.2% of sales, for the nine months ended April 26, 2008. The decrease was primarily due to a $10,489,000 decrease in selling, general and administrative expenses for the retail division, partially offset by the addition of nine months of selling, general and administrative expenses for the wholesale division and corporate executive office as compared to the addition of only three months of such expenses for the nine months ended April 26, 2008.

For the nine months ended April 25, 2009, the Company recorded a net loss applicable to common shareholders of $27,607,000, or $(1.05) per diluted share ($8,507,000 or $(0.32) per diluted share excluding the $19,100,000 goodwill impairment charge recorded in the fiscal 2009 second quarter), compared to a net loss applicable to common shareholders of $8,474,000, or $(0.51) per diluted share, for the nine months ended April 26, 2008. Adjusted EBITDA for the nine months ended April 25, 2009 was a loss of $1,640,000 compared to an Adjusted EBITDA loss of $1,563,000 for the nine months ended April 26, 2008.

Thomas Lynch, the Company's Chairman and Chief Executive Officer, stated, “We are continuing to implement our key initiatives, including reducing and controlling operating expenses, vertically integrating our retail and wholesale operations where complementary to derive additional margin benefits and transitioning certain manufacturing support functions to our facility in the Philippines. While we are disappointed with the significant reduction in wholesale business, we have implemented aggressive cost saving measures and are collaborating with our customers to develop new products with broad consumer appeal; however, we cannot be assured that our wholesale sales will return to historical levels.”

Mr. Lynch continued, “During the fiscal 2009 third quarter, we launched our improved website. Following an initial transition period, we expect fredericks.com to provide customers with an enhanced pleasurable online shopping experience for intimate apparel and related products. Additionally, in order to continue to meet our future operating needs beyond fiscal year 2009 and execute our business plans, we are currently exploring additional financing, strategic relationships and other financial arrangements, including obtaining additional funding from our largest shareholders, as we strive to return to profitability and increase shareholder value. If we cannot raise funds on acceptable terms, we may be required to curtail our operations significantly, which could adversely affect our business.”

Frederick's of Hollywood Group Inc

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