Frederick's of Hollywood
Frederick’s of Hollywood Group Inc. Reports Financial Results for Fiscal 2011 Third Quarter
Tuesday 14 June 2011
New York, New York – June 14, 2011 —Frederick’s of Hollywood Group Inc. (NYSE Amex: FOH) (“Company”) today announced financial results for its fiscal 2011 third quarter and nine months ended April 30, 2011.
Thomas Lynch, the Company’s Chairman and Chief Executive Officer, stated, “While we are disappointed by the fiscal third quarter results, our outlook for fiscal 2012 is positive. Inventory is approaching appropriate levels, and we remain focused on our ongoing operating initiatives that will help us grow in the long term. Most recently, we strategically reorganized our merchandising and design team to strengthen our core retail operations and to provide our customers with more trend-right fashions. We are beginning to see the impact of these efforts in the current quarter. We are also continuing to explore licensing opportunities, both domestically and internationally.”
Fiscal 2011 Third Quarter Compared to Fiscal 2010 Third Quarter:
· Net loss applicable to common shareholders was $387,000 or $(0.01) per diluted share, compared to net income of $218,000 or $0.01 per diluted share.
o Net loss from continuing operations was $367,000, compared to net income of $958,000.
o Net loss from discontinued operations, net of tax, decreased to $20,000 from $608,000.
· Adjusted EBITDA from continuing operations was $953,000 compared to $2,550,000. A reconciliation of GAAP results to Adjusted EBITDA from continuing operations, a non-GAAP measurement, is provided in the accompanying table.
· Net sales decreased 11.6% to $32,599,000 from $36,883,000.
o Total store sales decreased 12.7% to $19,610,000 while comparable store sales decreased 10.1%.
o Direct sales (catalog and website operations) decreased 12.1% to $10,526,000.
o Licensing revenue was $582,000 or 1.8% of total revenue.
o Other revenue, consisting of shipping revenue and commissions earned on direct sell-through programs, decreased 23.3% to $1,881,000.
· Gross margin, as a percentage of net sales, decreased to 38.3% from 41.5%.
· Selling, general and administrative expenses decreased by 10.0% to $12,485,000, or 38.3% of sales, from $13,874,000 or 37.6% of sales.
Fiscal Nine Months Ended April 30, 2011 Compared to Fiscal Nine Months Ended April 24, 2010:
· Net loss applicable to common shareholders was $4,871,000, or ($0.13) per diluted share, compared to a net loss of $9,097,000, or ($0.34) per diluted share.
o Net loss from continuing operations decreased to $3,458,000 from $3,950,000.
o Net loss from discontinued operations, net of tax, decreased to $1,413,000 from $4,754,000.
· Adjusted EBITDA from continuing operations was $755,000 compared to $1,187,000. A reconciliation of GAAP results to Adjusted EBITDA from continuing operations, a non-GAAP measurement, is provided in the accompanying table.
· Net sales decreased 10.4% to $93,798,000 from $104,740,000.
o Total store sales decreased 14.2% to $56,287,000 while comparable store sales decreased 11.4%.
o Direct sales (catalog and website operations) decreased 2.7% to 31,799,000.
o Licensing revenue was $619,000 or 0.7% of total revenue.
o Other revenue decreased 21.4% to $5,093,000.
· Gross margin, as a percentage of net sales, decreased to 37.7% from 37.9%.
· Selling, general and administrative expenses decreased by 10.8% to $37,677,000, or 40.2% of sales, from $42,228,000 or 40.3% of sales.
Non-GAAP Financial Measures
For purposes of evaluating our continuing operating performance, the Company uses an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) measurement, which is computed as the net income/(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.
|
|
Three Months Ended |
|
Nine Months Ended |
|||
|
(in thousands) |
April 30, 2011 |
April 24, 2010 |
|
April 30, 2011 |
April 24, 2010 |
|
|
Net income (loss) from continuing operations |
$(367) |
$ 958 |
|
$(3,458) |
$(3,950) |
|
|
Depreciation and amortization |
761 |
1,017 |
|
2,372 |
3,181 |
|
|
Interest |
361 |
447 |
|
1,104 |
1,397 |
|
|
Income tax expense |
20 |
19 |
|
60 |
58 |
|
|
Stock compensation expense |
178 |
109 |
|
677 |
501 |
|
|
Adjusted EBITDA from continuing operations |
$ 953 |
$2,550 |
|
$ 755 |
$ 1,187 |
|
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; foreign government regulations and risks of doing business abroad; and the other risks that are described from time to time in Frederick’s of Hollywood Group Inc.’s SEC reports. Frederick’s of Hollywood Group Inc. 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.
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:
(212) 779-8300
Investor Contacts:
KCSA Strategic Communications
CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands) April 30, 2011 July 31, 2010 (Unaudited) (Audited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 321 $ 536 Restricted cash - 4,660 Accounts receivable 1,031 1,127 Income tax receivable 85 127 Merchandise inventories 13,121 10,951 Prepaid expenses and other current assets 1,588 2,298 Deferred income tax assets 333 875 Current assets of discontinued operations - 4,185 Total current assets 16,479 24,759 PROPERTY AND EQUIPMENT, Net 11,571 13,861 INTANGIBLE AND OTHER ASSETS 18,779 19,392 LONG-TERM ASSETS OF DISCONTINUED OPERATIONS - 960 TOTAL ASSETS $ 46,829 $ 58,972 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Revolving credit facility $ 3,711 $ 3,269 Accounts payable and other accrued expenses 13,934 20,198 Deferred revenue from gift cards 1,958 1,781 Current liabilities of discontinued operations 283 2,041 Total current liabilities 19,886 27,289 DEFERRED RENT AND TENANT ALLOWANCES 4,836 4,926 TERM LOAN 7,321 7,002 OTHER 20 70 DEFERRED INCOME TAX LIABILITIES 7,569 8,377 TOTAL LIABILITIES 39,632 47,664 SHAREHOLDERS' EQUITY 7,197 11,308 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 46,829 $ 58,972
|
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, Except Per Share Amounts) |
|
||||||||
|
|
|
||||||||
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||
|
|
|
April 30, 2011 |
|
April 24, 2010 |
|
April 30, 2011 |
|
April 24, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
|
$32,599 |
|
$36,883 |
|
$93,798 |
|
$104,740 |
|
|
Cost of goods sold, buying and occupancy |
|
20,100 |
|
21,585 |
|
58,415 |
|
65,007 |
|
|
Gross profit |
|
12,499 |
|
15,298 |
|
35,383 |
|
39,733 |
|
|
Selling, general and administrative expenses |
|
12,485 |
|
13,874 |
|
37,677 |
|
42,228 |
|
|
Operating income (loss) |
|
14 |
|
1,424 |
|
(2,294) |
|
(2,495) |
|
|
Interest expense, net |
|
361 |
|
447 |
|
1,104 |
|
1,397 |
|
|
Income (loss) from continuing operations before income tax provision |
|
(347) |
|
977 |
|
(3,398) |
|
(3,892) |
|
|
Income tax provision |
|
20 |
|
19 |
|
60 |
|
58 |
|
|
Net income (loss) from continuing operations |
|
(367) |
|
958 |
|
(3,458) |
|
(3,950) |
|
|
Net loss from discontinued operations |
|
(20) |
|
(608) |
|
(1,413) |
|
(4,754) |
|
|
Net income (loss) |
|
(387) |
|
350 |
|
(4,871) |
|
(8,704) |
|
|
Less: Preferred stock dividends |
|
- |
|
132 |
|
- |
|
393 |
|
|
Net income (loss) applicable to common shareholders |
|
$(387) |
|
$218 |
|
$ (4,871) |
|
$(9,097) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income (loss) per share from continuing operations |
|
$(.01) |
|
$.03 |
|
$(.09) |
|
$(.16) |
|
|
Basic and diluted net loss per share from discontinued operations |
|
- |
|
(.02) |
|
(.04) |
|
(.18) |
|
|
Total basic and diluted net income (loss) per share applicable to common shareholders |
|
$(.01) |
|
$.01 |
|
$(.13) |
|
$(.34) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding – basic |
|
38,627 |
|
27,642 |
|
38,476 |
|
26,820 |
|
|
Weighted average shares outstanding – diluted |
|
38,627 |
|
27,835 |
|
38,476 |
|
26,820 |
|