EX-99.1 3 v338909_ex99-1.htm EXHIBIT 99.1

EXHIBIT 99.1

 

FOR IMMEDIATE RELEASE:

 

Frederick’s of Hollywood Group Inc.

Reports Fiscal 2013 Second Quarter Financial Results and

Announces Management Change

- - -

 

Hollywood, CA – March 18, 2013 – Frederick’s of Hollywood Group Inc. (OTCQB: FOHL) (“Company”) today announced the financial results for its fiscal 2013 second quarter ended January 26, 2013. The Company also reported that, effective March 15, 2013, it has terminated its employment agreement with Don Jones, the Company’s President and Chief Operating Officer. The Company’s CEO, Mr. Thomas Lynch, will assume Mr. Jones’ duties.

 

“We are disappointed by the operational and financial issues that have held us back from reconnecting with our customers, which led to sales results that were counter to much of the retail sector. Therefore, we have implemented a plan to refocus on our lingerie products. This plan included the $10 million capital infusion from Five Island Asset Management LLC, a subsidiary of Harbinger Group Inc., which was announced just last week. This capital infusion will play an important role in stabilizing our business and will allow us to improve sales by maintaining appropriate inventory levels in the categories our customers are looking for. We are continuing to balance our revenues and expenses, including having me assume the responsibilities of President and COO,” stated Mr. Thomas Lynch, the Company’s Chairman and CEO.

 

“Revenue for the second quarter of fiscal 2013 was lower due to several events, most notably the poor results from our expansion into non-core product categories (dresses, sportswear and shoes). Our merchandising strategy to provide a fuller array of products across a broader assortment of merchandise and price points did not meet our expectations due to the limited funding to successfully market these new product categories. In addition, we had lower sales of core intimate apparel products (bras, lingerie and corsets), which is primarily attributable to a reduction in inventory levels in these categories. The sales for these categories were also negatively impacted by the late delivery of products from our vendors due to slower payments,” continued Mr. Lynch. “We have begun the process of reconnecting with our customers and increasing inventory levels of the core intimate apparel products our customers expect us to have. We are looking forward to improving the financial performance of our company.”

 

 

 

 

Fiscal 2013 Second Quarter Compared to Fiscal 2012 Second Quarter:

·Net loss applicable to common shareholders was $10.0 million or $(0.26) per diluted share, compared to a net loss of $3.5 million or $(0.09) per diluted share
·Adjusted EBITDA from continuing operations was a loss of $7.5 million compared to a loss of $2.3 million. A reconciliation of GAAP results to Adjusted EBITDA, a non-GAAP measurement, is provided in the accompanying table
·Net sales decreased 25.3% to $24.3 million from $32.5 million
oComparable store sales decreased 15.7%
oTotal store sales decreased 19.0% to $15.5 million
oDirect sales decreased 32.5% to $8.1 million
oOther revenue, consisting primarily of shipping revenue, commissions earned on direct sell-through programs and breakage on gift cards, decreased 49.5% to $0.7 million
·Gross margin, as a percentage of net sales, was 24.1% as compared to 31.2%
·Selling, general and administrative expenses increased by $0.5 million to $13.7 million, or 56.4% of sales, from $13.2 million, or 40.7% of sales

 

Fiscal Six Months Ended January 26, 2013 Compared to Fiscal Six Months Ended January 28, 2012:

·Net loss applicable to common shareholders was $15.2 million, or $(0.39) per diluted share, compared to a net loss of $5.9 million, or $(0.15) per diluted share
·Adjusted EBITDA was a loss of $11.4 million compared to a loss of $3.3 million. A reconciliation of GAAP results to Adjusted EBITDA from continuing operations, a non-GAAP measurement, is provided in the accompanying table
·Net sales decreased 23.2% to $46.7 million from $60.9 million
oComparable store sales decreased by 16.3%
oTotal store sales decreased 19.9% to $30.6 million
oDirect sales decreased 27.2% to $14.6 million
oOther revenue, consisting of shipping revenue, commissions earned on direct sell-through programs and breakage on gift cards, decreased 41.4% to $1.5 million
·Gross margin decreased to 25.5% as compared to 32.4%
·Selling, general and administrative expenses decreased by $0.9 million to $23.8 million or 50.9% of sales, from $24.7 million, or 40.5% of sales

 

Non-GAAP Financial Measures

For purposes of evaluating operating performance, the Company uses an Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) measurement, which is computed as the net loss appearing on the statement of operations plus depreciation and amortization, interest, income tax provision, stock compensation expense and non-cash impairment of long-lived assets. Adjusted EBITDA is used by management to evaluate the operating performance of the Company’s business for comparable periods. Adjusted EBITDA should not be used by investors or other third parties as the sole basis for formulating investment decisions as it excludes a number of important cash and non-cash recurring items.

 

While Adjusted EBITDA is a non-GAAP measurement, management believes that it is an important indicator of operating performance because:

·Adjusted EBITDA excludes the effects of financing and investing activities by eliminating the effects of interest and depreciation costs; and
·Other significant items, while periodically affecting the Company’s results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects the comparability of results.

 

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Reconciliation of GAAP Results to Adjusted EBITDA:

 

(in thousands)  Three Months Ended   Six Months Ended 
   January 26,
2013
   January 28,
2012
   January 26,
2013
   January 28,
2012
 
Net loss  $(9,872)  $(3,538)  $(14,959)  $(5,870)
Depreciation and amortization   439    651    946    1,316 
Interest   520    431    1,051    852 
Income tax provision   25    17    50    34 
Stock compensation expense   87    186    181    320 
Non-cash impairment of long-lived assets   1,295    -    1,295    - 
Adjusted EBITDA  $(7,506)  $(2,253)  $(11,436)  $(3,348)

 

Forward Looking Statement

Certain of the matters set forth in this press release are forward-looking and involve a number of risks and uncertainties. These statements are based on management’s current expectations or beliefs. Actual results may vary materially from those expressed or implied by the statements herein. Among the factors that could cause actual results to differ materially are the following: competition; business conditions and industry growth; rapidly changing consumer preferences and trends; general economic conditions; working capital needs; continued compliance with government regulations; loss of key personnel; labor practices; product development; management of growth, increases in costs of operations or inability to meet efficiency or cost reduction objectives; timing of orders and deliveries of products; risks of doing business abroad; the ability to protect our intellectual property; and the other risks that are described from time to time in the Company’s SEC reports. The Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise.

 

About Frederick’s of Hollywood Group Inc.

Frederick’s of Hollywood Group Inc., through its subsidiaries, sells women’s apparel and related products under its proprietary Frederick’s of Hollywood(R) brand through 115 specialty retail stores, a catalog and an online shop at http://www.fredericks.com. With its exclusive product offerings including Seduction by Frederick’s of Hollywood and the Hollywood Exxtreme Cleavage(R) bra, Frederick’s of Hollywood is the Original Sex Symbol(R).

 

Our press releases and financial reports can be accessed on our corporate website at http://www.fohgroup.com.

 

This release is available on the KCSA Strategic Communications Web site at http://www.kcsa.com.

 

CONTACT:

Frederick’s of Hollywood Group Inc.

Thomas Rende, CFO

(212) 779-8300

 

Investor Contacts:

Todd Fromer / Garth Russell

KCSA Strategic Communications

212-896-1215 / 212-896-1250

tfromer@kcsa.com / grussell@kcsa.com

 

(Tables Below)

 

 

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FREDERICK’S OF HOLLYWOOD GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

 

 

   January 26,   July 28, 
   2013   2012 
   (Unaudited)   (Audited) 
ASSETS          
CURRENT ASSETS:          
Cash  $216   $741 
Accounts receivable   910    997 
Merchandise inventories   14,261    12,915 
Prepaid expenses and other current assets   1,085    952 
Deferred income tax assets   48    48 
Total current assets   16,520    15,653 
           
PROPERTY AND EQUIPMENT, Net   4,568    6,806 
INTANGIBLE ASSETS   18,259    18,259 
OTHER ASSETS   932    756 
TOTAL ASSETS  $40,279   $41,474 
           
LIABILITIES AND SHAREHOLDERS’ DEFICIENCY          
CURRENT LIABILITIES:          
Revolving credit facility  $7,947   $7,356 
Accounts payable and other accrued expenses   27,878    14,623 
Total current liabilities   35,825    21,979 
           
DEFERRED RENT AND TENANT ALLOWANCES   3,497    3,887 
TERM LOAN   9,155    9,039 
DEFERRED INCOME TAX LIABILITIES   7,352    7,352 
OTHER   10    - 
TOTAL LIABILITIES   55,839    42,257 
           
TOTAL SHAREHOLDERS’ DEFICIENCY   (15,560)   (783)
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIENCY  $40,279   $41,474 

 

 

 

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FREDERICK’S OF HOLLYWOOD GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In Thousands, Except Per Share Amounts)

 

   Three Months Ended   Six Months Ended 
   January 26,   January 28,   January 26,   January 28, 
   2013   2012   2013   2012 
                 
Net sales  $24,288   $32,520   $46,743   $60,883 
Cost of goods sold, buying and occupancy   18,429    22,381    34,818    41,184 
Gross profit   5,859    10,139    11,925    19,699 
Selling, general and administrative expenses   13,702    13,229    23,778    24,683 
Loss on abandonment   189    -    710    - 
Impairment of long-lived assets   1,295    -    1,295    - 
Operating loss   (9,327)   (3,090)   (13,858)   (4,984)
Interest expense, net   520    431    1,051    852 
Loss before income tax provision   (9,847)   (3,521)   (14,909)   (5,836)
Income tax provision   25    17    50    34 
Net loss   (9,872)   (3,538)   (14,959)   (5,870)
Less Preferred stock dividends   118    -    234    - 
Net loss applicable to common shareholders  $(9,990)  $(3,538)  $(15,193)  $(5,870)
Basic and diluted net loss per share applicable to common shareholders  $(0.26)  $(0.09)  $(0.39)  $(0.15)
                     
Weighted average shares outstanding – basic and diluted   38,996    38,790    38,987    38,742 

 

 

 

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