US: American Apparel Q3 profit soars despite lower sales
- Q3 net income rose 82.6% to $4.2m
- Sales were down 2.9% to $150.3m
- Reiterated earlier FY guidance
Moves to streamline its inventories and switch towards higher-margin retail sales have helped lift T-shirt and casual clothing firm American Apparel Inc to an 82.6% hike in third quarter profit.
The Los Angeles based firm, which makes and retails branded fashion basics, said its net income rose to $4.2m or $0.05 per share, up from $2.3m or $0.03 per share, a year ago. Last year's figures were depressed by stock compensation payments, the company said.
Sales for the three months to 30 September were down 2.9% to $150.3m, it said today (10 November), from $154.8m last time.
Retail sales at its 276 stores rose 3.7% to $101.0m, helping to offset a 14.5% drop in wholesale revenues to $40.2m.
Comparable store sales for stores open at least 12 months dropped 16% on a constant currency basis, and online consumer sales fell 12.5% to $9.1m.
However, the decline in wholesale revenues to 26.7% of sales from 30.4% a year ago - and the favourable shift in mix towards greater retail sales - helped lift gross margin to 58.1% from 49.1% a year ago.
The addition of new stores also meant a rise in operating expenses, which climbed to 50.6% of net sales from 44.7% in last year's quarter.
"While we are pleased that we were able to deliver a profit in the third quarter in spite of the difficult environment, I believe the successes we had in terms of streamlining our inventories and significantly reducing our indebtedness will prove particularly valuable as we move forward," said chairman and CEO Dov Charney.
"While it is still very early, we are encouraged by some indications pointing to the beginning of momentum in our sales.
"We believe that for the long term, our business remains on track as we continue to expand our brand's presence both in the US and internationally."
Looking ahead, American Apparel still expects its full-year sales to be in the range of $540m to $555m, with a loss of $1m to a profit of $4m in the period.
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