Significant investments in retail expansion led to a fall in first quarter profits at American Apparel Inc, despite a 51.9% surge in sales.

The clothing group saw across-the-board revenue increases in the three months to 31 March, but investment costs led to net income falling to US$1.1m from $1.7m a year ago.

Total net sales were up 51.9% to $111,634, led by revenue increases for the company's Canadian and international arms of 70.4% and 83.5% respectively. US wholesale revenues were up 27.4%, while US retail figures lifted 56.1%.

The company said total retail sales across all segments were up 65% to $63.1m, with same store sales surging 36%. Total wholesale revenues rose 38% to $48.5m.

"The first quarter of 2008 was a period of significant investment at American Apparel," said Dov Charney, American Apparel chairman and CEO. "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… With the groundwork having been laid in the first quarter, we look forward to making 2008 another record year for American Apparel."