Frederick’s of Hollywood Group Inc. reduced its second-quarter loss despite sharply lower revenues, including a drop in same-store sales and the near evaporation of wholesale business with Wal-Mart Stores Inc.
In the three months ended Jan. 23, the company reported a net loss applicable to common shareholders of $4.9 million, or 18 cents a diluted share, versus a $20.2 million, or 77 cent, loss in the prior-year quarter. Last year’s bottom line was dragged down by a $19.1 million pretax goodwill impairment charge. Adjusted earnings before interest, taxes, depreciation and amortization fell to a loss of $2.6 million from a profit of $1.3 million.
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Revenues slid 21.3 percent to $41.3 million from $52.5 million in last year’s period as retail sales fell 4.2 percent to $36.7 million, including a 5.3 percent decline in same-store sales, and wholesale volume contracted 67.7 percent to $4.6 million. Gross margin dropped to 34 percent of sales from 34.8 percent in the year-ago quarter.
Thomas Lynch, chairman and chief executive officer, noted “a reduction in net sales with our largest customer” accounted for 78 percent of the decrease in wholesale revenues and that volume for that unit, the former Movie Star Inc., is expected to stabilize. The firm’s quarterly report with the Securities and Exchange Commission, Form 10-Q, showed that its business with Wal-Mart Stores Inc. declined to $57,000 in the quarter from $7.6 million a year, a 99.2 percent cut, as the retailer shifted “its focus to product categories that differ from those Wal-Mart historically purchased from us.”
The company expects to build on its e-commerce business and to soon unveil the first of what is expected to be a series of licensing agreements for the Frederick’s of Hollywood brand.
“While we continue to face certain macroeconomic pressures, the benefits from our cost-cutting program have started to offset these effects and will increasingly play a part in our turnaround,” Lynch said.
Selling, general and administrative costs declined $3.5 million to $34.7 million in the first six months of the year, during which the firm trimmed its net loss to $9.3 million, or 35 cents a diluted share, from $25.5 million, or 97 cents, a year ago. Sales declined 5.3 percent to $43.1 million from $45.4 million.