American Apparel Inc. Reports Third Quarter 2013 Financial Results

On November 14, 2013, American Apparel Inc., a vertically integrated manufacturer, distributor and retailer of branded fashion-basic apparel, announced financial results for its third quarter ended September 30, 2013.

Financial Performance Summary for the three and nine months ended September 2013

• For the three months ended September 30, 2013, net sales increased 1 percent to $164.5 million on a 2 percent increase in comparable store sales and a 2 percent increase in wholesale net sales.
• For the three months ended September 30, 2013, adjusted EBITDA was $3.8 million vs. $13.3 million in the 2012 third quarter.
• For the nine months ended September 30, 2013, net sales increased 5 percent to $464.8 million on a 5 percent increase in comparable store sales and 6 percent increase in wholesale net sales.
• For the nine months ended September 30, 2013, adjusted EBITDA was $11.0 million vs. $18.8 million in the nine months ended September 30, 2012.
• A substantial majority of the decrease in adjusted EBITDA for each period was a result of transition and start-up costs associated with the conversion to the company's new distribution center (see Company Outlook and EBITDA Guidance Reconciliation below).

According to John Luttrell, chief financial officer of American Apparel, Inc., "Our lower EBITDA performance was substantially impacted by events surrounding the transition to and opening of our new distribution center. However, we believe that these issues are now substantially behind us, and although there will be some remaining transition costs in the fourth quarter of 2013, we do not anticipate that these transition and start-up costs will negatively affect our financial performance in 2014.

"Sales momentum for the quarter was positive despite weak U.S. apparel sector demand. Our sales were also impacted by the distraction from the distribution center transition and by late product deliveries. This contributed to a substantial increase in out of stock positions for some of our most popular styles. We also believe we missed sales opportunities by not carrying enough inventory of top selling items to meet both retail and wholesale demand."

"No question, we had a rough third quarter, although I think it is important to emphasize that most of the challenges we have faced were primarily technically oriented and we believe these challenges are substantially behind us," said Dov Charney, chairman and CEO of American Apparel Inc. "That being said, I am confident in three things: our brand is strong, our customer is energized, and our product line is being well received. I believe American Apparel is a company that can grow significantly.

"There are great opportunities for online growth, and there is a resurgence of interest in made-in-USA clothing especially within the wholesale ad-specialty industry. Private label orders are also up significantly and we anticipate a lot of growth in that area. An example of the made-in-USA demand includes an order we recently received for over 500,000 units that will be sold as printed items at a major retailer. We are currently hiring over 300 sewing employees to meet demand I anticipate in 2014. It is also noteworthy that our unit inventories are at their lowest levels in three years.

"There are requests for us to open stores all over the world in major cities like Hong Kong, Taipei, Copenhagen and Madrid. I am looking forward to working with our team to produce strong results for shareholders in 2014. The company is uniquely positioned and has a competitive advantage as a result of its made-in-USA manufacturing, distribution, and retail infrastructure, which has been developed over the last 10 years. I believe that these factors present a unique opportunity for growth."

For the full report, visit American Apparel's investors' site. For more information of American Apparel, visit www.americanapparel.com/wholesale.