Published
May 17, 2016
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Differential Brands posts 84% sales increase following merger

Published
May 17, 2016

Differential Brands Group Inc. reported a strong first quarter of fiscal 2016 with consolidated net sales increasing 84% from $18.9 million to $34.9 million.


Robert Graham, one of the brands under Differential Brands Group following the merger in January 2016


 
Overall gross profit increased 71% to $20.4 million from $11.9 million in the previous first quarter, adjusted operating income was $2.4 million, excluding transaction expenses associated with the company’s merger with RG Parent LLC, and adjusted EBITDA increased to $3.9 million from $1.6 million. In January, Hudson Jeans and Robert Graham merged to form Differential Brands. The addition of Hudson added $19.9 million in pro forma net sales, which increased consolidated net sales 97% to $37.3 million.
 
Michael Buckley, Chief Executive Officer, commented, “With the completion of the Merger, our focus has shifted to executing on our omni-channel vision for the Company and creating the playbook for future acquisitions.” Mr. Buckley continued, “With the strength of our brands under the Differential umbrella and the addition of a seasoned merchant to our roster, we believe that we are well positioned for organic growth in the back half of 2016.”

Net sales for the wholesale segment increased to $25.6 million from $11.8 million, and gross margins for the segment was 55% compared to 53%. The Consumer Direct subdivision contributed $8.8 million in the quarter compared to $6.5 million in the prior year. The subdivision faced challenges related to traffic and weakening foreign currency against the dollar. In addition, gross margins for the retail segment decreased to 66% from 77% and were impacted by liquidating inventory in connection with the closure of Joe’s branded retail stores retained following the merger.
 
Corporate and other expenses also increased to $10.4 million from $5.0 million due to transaction related expenses in connection with the merger. Excluding the transaction and restructuring expenses, corporate and other expenses would have increased to $7.1 million.

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