American Apparel total retail sales go up in Q1

14 May '08

4 min read

Operating expenses increased 170 basis points to 51.4% of sales, partly as a result of a shift in mix due to the growth of the company's retail operations. Operating expenses in the first quarter of 2008 were impacted by $0.4 million related to stock-based compensation payable to directors recognized in the period, $0.7 million in legal expenses incurred to defend against a wrongful termination suit, and $0.4 million in additional costs related to the relocation of the company's Canadian headquarters and warehouse. Retail store pre-opening expenses were $1.7 million in the first quarter of 2008 versus $1.1 million in the first quarter of 2007.

Net income for the first quarter was $1.1 million versus $1.7 million in the same period a year ago, or $0.02 per diluted share versus $0.03 per diluted share a year ago.

The company reaffirmed its financial guidance for the year. The company continues to expect diluted earnings per share in the range of $0.32 to $0.36, before giving effect to a one-time non-cash stock compensation expense resulting from the company's previously announced employee stock grant. The company currently has over 35 signed leases for retail stores in its pipeline and believes it is still in a position to open 40-45 stores in calendar 2008 as originally planned.

Dov Charney, Chairman and Chief Executive Officer, stated: "The first quarter of 2008 was a period of significant investment at American Apparel. During a quarter which is traditionally the slowest one for our business, we began a new phase of retail expansion. While significant capital outlays were made in the first quarter, we will begin to see this investment pay off in future quarters.

During this period, we moved our Canadian operations to a new facility. We ramped up the new garment dye facility purchased last December. Earlier we announced another significant acquisition of production capacity from U.S. Dyeing & Finishing. In the first quarter, we successfully went live on the first phase of our new ERP system, which should provide for production efficiencies and a more streamlined supply chain.

We have also hired a number of experienced accounting professionals to bolster our internal staff, and have begun working with Moss Adams LLP to bring our internal controls in compliance with Sarbanes-Oxley. With the groundwork having been laid in the first quarter, we look forward to making 2008 another record year for American Apparel.”

American Apparel Inc

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