Frederick's of Hollywood Group Inc. Reports Profitable Fiscal 2010 Third Quarter Financial Results

Frederick's of Hollywood Group Inc. Reports Profitable Fiscal 2010 Third Quarter Financial Results


NEW YORK, June 8 /PRNewswire-FirstCall/ -->
-- Net income applicable to common shareholders was $218,000, or $0.01 per
diluted share, compared to a net loss of $2.1 million or ($0.08) per
diluted share
-- Adjusted EBITDA was $2,165,000 compared to $22,000. A reconciliation of
GAAP results to Adjusted EBITDA, a non-GAAP measurement, is provided in
the accompanying table.
-- Net sales decreased 7.2% to $43.4 million from $46.8 million
-- Total store sales decreased 8.5% while comparable store sales
decreased 7.7%
-- Direct sales (catalog and website operations) decreased 2.8%.
-- Total wholesale sales decreased $860,000 or 11.7%, which accounted
for approximately 25.5% of our total decrease
-- Gross margin, as a percentage of net sales, increased to 40.2% from
38.2% as a result of an increase in wholesale gross margin from 18.8% to
32.8%
-- Selling, general and administrative expenses decreased by 14.6% to $16.6
million, or 38.3% of sales, from $19.5 million or 41.6% of sales
Fiscal Nine Months Ended April 24, 2010 Compared to Fiscal Nine Months
Ended April 25, 2009:



-- Net loss applicable to common shareholders was $9.1 million or ($0.34)
per diluted share, compared to a net loss of $27.6 million or ($1.05)
per diluted share
-- Adjusted EBITDA was a loss of $2,785,000 compared to a loss of
$1,640,000. A reconciliation of GAAP results to Adjusted EBITDA, a
non-GAAP measurement, is provided in the accompanying table.
-- Net sales decreased 14.0% to $121.9 million from $141.8 million
-- Total store sales decreased 6.4% while comparable store sales
decreased 6.1%
-- Direct sales (catalog and website operations) decreased 4.0%
-- Total wholesale sales decreased $13.8 million or 44.5%, which
accounted for approximately 69% of our total decrease
-- Gross margin, as a percentage of net sales, increased to 36.1% from
35.8%
-- Selling, general and administrative expenses decreased by 11.0% to $51.3
million, or 42.1% of sales, from $57.6 million or 40.6% of sales


Mr. Lynch continued, "Our team has worked extremely hard to implement
the turnaround strategy we launched last year, and the results of our
efforts are driving improved performance. In conjunction with our strategy,
we've been able to successfully meet several key milestones, including an
exclusive, multi-year international licensing agreement with Blue By Yoo to
manufacture, distribute, and market a new line of swimwear under the
Frederick's of Hollywood brand. In addition to swimwear, we have identified
domestic and international licensing opportunities that will allow us to
expand beyond intimate apparel and into a lifestyle brand, which includes
opportunities in product categories such as fragrance, jewelry,
accessories, footwear, headwear, handbags and costumes as well as
partnering with international distributors in countries such as Korea,
Brazil, Japan, China and Canada.

"In addition to our licensing strategy, we continue to extend the
Frederick's of Hollywood brand through enhanced marketing efforts and
partnerships. Most recently, we announced a strategic marketing partnership
with Hard Rock Hotel & Casino Las Vegas, where we will have a significant
presence and a number of brand-building promotions on-site. We also
launched a complete social media and on-line marketing campaign to drive
awareness and e-commerce sales within our target audience."

"We are encouraged by our solid performance this quarter and have a
number of reasons to be optimistic about our future. Sales in our wholesale
business are starting to gain traction with open orders up approximately
20%. In addition, our fourth quarter financials will reflect our recently
closed Debt Exchange and Preferred Stock Conversion transaction, which
increased shareholders' equity by more than $23.0 million," concluded Mr.
Lynch.

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 income (loss)
appearing on the statement of operations plus depreciation and
amortization, interest, income tax expense, stock compensation expense,
deferred rent and non-cash goodwill impairment. 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.





Three Months Nine Months
Ended Ended
April April April April
24, 25, 24, 25,
2010 2009 2010 2009
------ ------ ------ ------
Net income (loss) applicable to
common shareholders $218 $(2,120) $(9,097) $(27,607)
Depreciation and amortization 1,278 1,430 4,060 4,436
Interest 447 337 1,397 1,186
Income tax expense 23 24 70 65
Stock compensation expense 131 197 493 637
Deferred rent 68 154 292 543
Non-cash goodwill impairment - - - 19,100
--- --- --- ------
Adjusted EBITDA $2,165 $22 $(2,785) $(1,640)
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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; large variations in sales volume with significant
customers; addition or loss of significant customers; 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; foreign government regulations and risks
of doing business abroad; and the other risks that are described from time
to time in Frederick's of Hollywood Group Inc.'s SEC reports. Frederick's
of Hollywood Group Inc. 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. conducts its business through its
multi-channel retail division and wholesale division. Through its
multi-channel retail division, Frederick's primarily sells women's intimate
apparel, swimwear and related products under its proprietary Frederick's of
Hollywood® brand through 126 specialty retail stores nationwide, a
world-famous catalog and an online shop at http://www.fredericks.com/. With
its exclusive product offerings including Seduction by Frederick's of
Hollywood, the Hollywood Extreme Cleavage® bra and Hollywood Sizzle Pool
Party Swim(TM), Frederick's of Hollywood is the Original Sex Symbol®.
Through its wholesale division, Frederick's designs, manufactures, sources,
distributes and sells women's intimate apparel throughout the United States
and Canada.

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/.