American Apparel Inc. chief executive officer Dov Charney told analysts Thursday that the retailer is taking steps to address the reduced manufacturing efficiency and restrictive covenants by its lenders, which hampered the firm’s fourth-quarter performance.
The company reported late Thursday that, in the three months ended Dec. 31, net income decreased 21.5 percent to $3 million, or 4 cents a diluted share, meeting analysts’ consensus estimate. In last year’s fourth quarter, net income was $3.9 million, or 5 cents.
Total sales grew 8.6 percent to $158.1 million from $145.6 million in last year’s quarter, while same-store sales declined 7 percent on a constant currency basis. American Apparel ended the year with 281 stores, having added 21 net new doors in 2009.
Related Articles
The company was forced to terminate 1,500 production line workers last year due to their inability to provide proper working papers to government inspectors. “The biggest problem has been employee productivity. We lost some of our best people,” Charney told analysts on a conference call, noting the company has ramped up training and expects productivity to improve this year.
You May Also Like
Restrictions on capital expenditures from American Apparel’s lenders have been a “drag on the business and a cloud over us,” said Charney. However, in the past few days the company has reached an agreement to loosen those restrictions in the first half of this year, which will allow it to make investments that should improve store productivity, said Charney. The debt-to-EBITDA ratio covenant will be 2.0 for the first quarter of this year and 1.9 for the second quarter.
The company declined to provide guidance for the new year until May.
American Apparel’s U.S. business is outpacing its international operations. “We are walking a thin line between positive and negative [comps] but we are moving into brighter skies in the U.S.,” Charney said. “We have some heavy lifting to do on the international side.”
For the full year, net income contracted 92.1 percent to $1.1 million, or 1 cent a diluted share, from $14.1 million, or 20 cents, in 2008. Sales were up 2.5 percent, to $558.8 million from $545.1 million, but same-store sales slipped 10 percent.
Also on Thursday, Signet Jewelers Ltd. reported a reawakening upper-end consumer helped it achieve higher same-store sales and a higher-than-expected fourth-quarter profit, and the momentum has carried into the first quarter.
The jewelry retailer posted net income of $117.2 million, or $1.36 a diluted share, for the three months ended Jan. 30, compared with an impairment-laden net loss of $424 million, or $4.97 a share, a year earlier. Revenues increased 7.1 percent to $1.2 billion from $1.12 billion in the year-ago period.
At The Wet Seal Inc., improvement in the Arden B. division helped the company beat analysts’ fourth-quarter earnings expectations despite tepid sales.
The Foothill Ranch, Calif.-based retailer said Thursday that, for the period ended Jan. 30, it registered net income of $80.8 million, or 79 cents a diluted share, compared with income of $4.3 million, or 4 cents, in the year-ago quarter. Excluding a tax benefit in the most recent quarter and impairment charges in the prior-year period, earnings per share were 10 cents a share, 2 cents above the analyst consensus published by Yahoo Finance, versus 9 cents in the 2008 quarter.
Revenues dropped 2.5 percent to $151 million, from $154.9 million, a year earlier.
(Additional earnings information can be found at WWD.com/business-news.)