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American Apparel Shares Rise On Q4 Profit, Outlook

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3/4/2013 7:39 PM ET

Shares of American Apparel, Inc. (APP: Quote) gained more than 14 percent in extended trade Monday after the company reported a turnaround to profit in the fourth quarter on higher sales and margins. Looking ahead, the branded fashion basic apparel retailer forecast higher sales for fiscal 2013.

Dov Charney, Chairman and CEO of American Apparel, Inc., said, "We are pleased with our fourth quarter results that again show solid growth and continuing momentum in all business segments and almost all major geographies. Significant sales growth, operating expense control and the acceleration of leverage of our fixed costs allowed us to increase EBITDA performance to $17.8 million for the fourth quarter of 2012 from $9.1 million for the fourth quarter of 2011."

American Apparel's comparable retail and online sales increased 11 percent in the fourth quarter. Meanwhile, online sales surged 42 percent and wholesale sales rose 19 percent.

Gross margin for the quarter was 53.8 percent compared to 53.2 percent in the same period last year, reflecting a shift in sales mix to higher margin online sales, reductions in manufacturing costs, and an improvement in retail gross margin.

Los Angeles, California-based American Apparel's fourth-quarter net income was $4.90 million or $0.04 per share, compared to net loss of $11.16 million or $0.11 per share for the year-ago quarter.

The latest quarter results include an income statement credit of $11.2 million or $0.10 per share associated with a non-cash reduction in the fair value of outstanding warrants. The prior-year quarter includes a similar credit of $2.3 million or $0.02 per share for a non-cash reduction in the fair value of such warrants.

Net sales for the fourth quarter grew 10 percent to $173.03 million from $157.58 million in the prior-year period.

For fiscal 2012, American Apparel's net loss narrowed to $37.27 million or $0.35 per share from net loss of $39.31 million or $0.42 per share in the prior year.

The latest year's results include $4.1 million or $0.04 per share of expense associated with a non-cash charge for an increase in the fair value of outstanding warrants. The prior year's results include an income statement credit of $23.5 million or $0.25 per share for a non-cash reduction in the fair value of such warrants.

Net sales for the year grew 13 percent to $617.31 million from $547.34 million in the previous year. Comparable retail and online sales for the year increased 15 percent, while net sales in the wholesale business rose 12 percent.

Looking ahead to fiscal 2013, American Apparel forecasts net sales of $652 million to $660 million.

Over the next three to five years, the company projects an EBITDA margin of 15 percent or 200 basis points higher than its previous peak reached in 2008.

APP closed Monday's trading at $1.29, up $0.01 or 0.78 percent on a volume of 179,193 shares. In after-hours, the stock further gained $0.19 or 14.73 percent to $1.48.

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by RTT Staff Writer

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