Frederick's of Hollywood Group Inc. Reports Fiscal 2013 First
Quarter Financial Results
HOLLYWOOD, Calif., Dec. 11, 2012 /PRNewswire/ -- Frederick's of
Hollywood Group Inc. (NYSE MKT: FOH) ("Company") today announced
the financial results for its fiscal 2013 first quarter ended
October 27, 2012.
"We have been concerned that, since the recession began,
customers have been conditioned for major price reductions.
We experienced firsthand the difficulty of trying to move away from
such promotional activity this quarter when we tested customer
tolerance for significantly lower promotional activity. While
we anticipated a drop in sales, we experienced a larger than
anticipated decline in customer traffic at our stores and on our
eCommerce site. As a result, we revised this strategy and have
returned to higher levels of promotional activity," stated
Thomas Lynch, the Company's Chairman
and Chief Executive Officer. "As previously disclosed, we are now
sharing some of the costs of our promotional activities with our
vendors, which will help offset some of the costs of the increased
promotions."
"Over the past few months, we have launched several new product
categories at our stores and on our eCommerce site, which are
gaining customer awareness. Our goal for these new product
lines is to expand the reach of the 'Frederick's of Hollywood' brand. We believe the strength of
our brand with consumers will continue to help the Company through
this difficult economic period," concluded Mr. Lynch.
Fiscal 2013 First Quarter Compared to Fiscal 2012 First
Quarter:
- Net loss applicable to common shareholders was $5.2 million, or $(0.13) per diluted share, compared to a net loss
of $2.3 million, or $(0.06) per diluted share.
- Adjusted EBITDA from continuing operations was a loss of
$3.9 million compared to a loss of
$1.1 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 20.8% to $22.4
million from $28.4 million.
- Comparable store sales decreased 17.0%.
- Total store sales decreased 20.8% to $15.2 million.
- Direct sales decreased 19.1% to $6.5
million.
- Other revenue, consisting of shipping revenue, commissions
earned on direct sell-through programs and breakage on gift cards,
decreased 31.9% to $0.8 million.
- Gross margin, as a percentage of net sales, decreased to 27.0%
from 33.7%. This decrease is attributable to an increase in
product and shipping promotional offers during the second half of
the fiscal 2013 first quarter.
- Selling, general and administrative expenses decreased by 12.0%
to $10.1 million, or 44.9% of sales,
from $11.5 million or 40.4% of
sales.
- The Company recorded a $521,000
loss on abandonment related to vacating a portion of its
Hollywood corporate office and a
portion of its Phoenix
distribution facility.
Non-GAAP Financial Measures
For purposes of evaluating
operating performance, the Company uses an Adjusted Earnings Before
Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")
measurement, which is computed as the net loss from continuing
operations appearing on the statement of operations plus
depreciation and amortization, interest, income tax provision and
stock compensation expense. Adjusted EBITDA is used by
management to evaluate the operating performance of the Company's
business for comparable periods. Adjusted EBITDA 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 is a non-GAAP measurement, management
believes that it is an important indicator of operating performance
because:
- Adjusted EBITDA 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.
(in
thousands)
|
|
Three Months
Ended
|
|
|
|
October
27,
2012
|
|
October
29,
2011
|
|
Net
loss
|
|
$(5,087)
|
|
$(2,332)
|
|
Depreciation and amortization
|
|
507
|
|
665
|
|
Interest
|
|
531
|
|
421
|
|
Income tax
provision
|
|
25
|
|
17
|
|
Stock
compensation expense
|
|
94
|
|
134
|
|
Adjusted
EBITDA
|
|
$(3,930)
|
|
$(1,095)
|
|
Forward Looking Statement
Certain of the matters set
forth in this press release are forward-looking and involve a
number of risks and uncertainties. These statements are based
on management's current expectations or beliefs. Actual
results may vary materially from those expressed or implied by the
statements herein. Among the factors that could cause actual
results to differ materially are the following: competition;
business conditions and industry growth; rapidly changing consumer
preferences and trends; general economic conditions; working
capital needs; continued compliance with government regulations;
loss of key personnel; labor practices; product development;
management of growth, increases in costs of operations or inability
to meet efficiency or cost reduction objectives; timing of orders
and deliveries of products; risks of doing business abroad; the
ability to protect our intellectual property; and the other risks
that are described from time to time in the Company's SEC
reports. The Company is under no obligation to, and expressly
disclaims any obligation to, update or alter its forward-looking
statements, whether as a result of new information, future events,
changes in assumptions or otherwise.
About Frederick's of Hollywood Group Inc.
Frederick's
of Hollywood Group Inc., through its subsidiaries, sells women's
intimate apparel and related products under its proprietary
Frederick's of Hollywood® brand through 119
specialty retail stores, a catalog and an online shop at
http://www.fredericks.com/. With its exclusive product
offerings including Seduction by Frederick's of Hollywood and the Hollywood Exxtreme
Cleavage® bra, Frederick's of Hollywood is the Original Sex
Symbol®.
Our press releases and financial reports can be accessed on our
corporate website at http://www.fohgroup.com.
This release is available on the KCSA Strategic Communications
Web site at http://www.kcsa.com.
CONTACT:
Frederick's of Hollywood Group
Inc.
Thomas Rende,
CFO
(212) 779-8300
Investor Contacts:
Todd Fromer / Garth Russell
KCSA Strategic Communications
212-896-1215 / 212-896-1250
tfromer@kcsa.com / grussell@kcsa.com
(Tables Below)
FREDERICK'S OF HOLLYWOOD GROUP INC.
|
CONSOLIDATED BALANCE SHEETS
|
(In
Thousands)
|
|
|
|
|
|
October
27,
|
|
July
28,
|
|
2012
|
|
2012
|
|
(Unaudited)
|
|
(Audited)
|
ASSETS
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
Cash and cash
equivalents
|
$
418
|
|
$741
|
Accounts
receivable
|
1,390
|
|
997
|
Merchandise
inventories
|
13,810
|
|
12,915
|
Prepaid expenses and
other current assets
|
1,575
|
|
952
|
Deferred income tax
assets
|
48
|
|
48
|
Total current assets
|
17,241
|
|
15,653
|
|
|
|
|
PROPERTY
AND EQUIPMENT, Net
|
6,183
|
|
6,806
|
INTANGIBLE
ASSETS
|
18,259
|
|
18,259
|
OTHER
ASSETS
|
986
|
|
756
|
TOTAL ASSETS
|
$42,669
|
|
$41,474
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
DEFICIENCY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Revolving credit
facility
|
$7,554
|
|
$7,356
|
Accounts payable and
other accrued expenses
|
20,689
|
|
14,623
|
Total current liabilities
|
28,243
|
|
21,979
|
|
|
|
|
DEFERRED
RENT AND TENANT ALLOWANCES
|
3,752
|
|
3,887
|
TERM
LOAN
|
9,097
|
|
9,039
|
DEFERRED
INCOME TAX LIABILITIES
|
7,352
|
|
7,352
|
TOTAL LIABILITIES
|
48,444
|
|
42,257
|
TOTAL SHAREHOLDERS' DEFICIENCY
|
(5,775)
|
|
(783)
|
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY
|
$42,669
|
|
$41,474
|
|
|
|
|
FREDERICK'S OF HOLLYWOOD GROUP INC.
|
|
CONSOLIDATED STATEMENTS OF
OPERATIONS
|
|
(Unaudited)
|
|
(In
Thousands, Except Per Share Amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended
|
|
|
October
27,
|
|
October
29,
|
|
|
2012
|
|
2011
|
|
|
|
|
|
Net
sales
|
|
$22,455
|
|
$28,363
|
Cost of
goods sold, buying and occupancy
|
|
16,389
|
|
18,803
|
Gross profit
|
|
6,066
|
|
9,560
|
Selling,
general and administrative expenses
|
|
10,076
|
|
11,454
|
Loss on
abandonment
|
|
521
|
|
-
|
Operating
loss
|
|
(4,531)
|
|
(1,894)
|
Interest
expense, net
|
|
531
|
|
421
|
Loss before income tax provision
|
|
(5,062)
|
|
(2,315)
|
Income tax
provision
|
|
25
|
|
17
|
Net
loss
|
|
(5,087)
|
|
(2,332)
|
Less:
Preferred stock dividends
|
|
116
|
|
-
|
Net loss
applicable to common shareholders
|
|
$(5,203)
|
|
$(2,332)
|
Basic and
diluted net loss per share applicable to common
shareholders
|
|
$(0.13)
|
|
$(0.06)
|
|
|
|
|
|
Weighted
average shares outstanding – basic and diluted
|
|
38,978
|
|
38,693
|
|
|
|
|
|
|
|
|
SOURCE Frederick's of Hollywood Group Inc.