With the threat of delisting from the NYSE Amex, news is expected out on how Frederick’s of Hollywood Group Inc. (FOH) plans to continue trading above the required threshold. Having watched its penny stock fall all through 2010 and 2011, 2012 began with a spark of life in FOH stock with a quick 93.94% gain, 0.33 to 0.64, the timing for an entry may be perfect. With an expected commentary from the Company about regarding their listing compliance addressing their less than $6 million of shareholders’ equity while sustaining losses from continuing operations and net losses in its five most recent fiscal years, the sultry apparel maker is officially on the list of penny stocks for 2013.
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FOH Stock Chart
Market Cap: 9.36M
Close: 0.2401 ▲ 0.0075 (3.22%)
52wk Range: 0.14 – 0.64
Average Trade Size: 1,094
Issued and Outstanding: 39,000,801
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As of October 27, 2012, there were 118 Frederick’s of Hollywood stores in 29 states with more than 10 million direct mail catalogs sent during fiscal year ended July 28, 2012. Sales for fiscal 2012, the twelve months ended July 28, 2012, produced revenues and gross profits slightly less than fiscal 2011 while investors watched the share price fall from as high as 0.74 to as low as 0.14. While YoY sales failed to increase, the fact that sales only slightly decreased compared to the year prior, $111.40 million versus $119.61 million respectively. Gross profit, from a percentage point of view, was much better in fiscal 2012 compared to the prior fiscal year, $41.62 million versus $42.97 million respectively.
Now that the holiday season has peaked and the niche market apparel retailer has survived 12-21-12 like the rest of us, FOH stock heading into 2013 is looking much like where American Apparel (APP) was positioned heading into 2012 — a gem of a bull for long traders. While the net losses for Frederick’s continue to mount up after the quarter ended October 27, 2012 produced another $5.20 million loss, the Company’s Q2 and how they plan to regain compliance are the key’s to seeing a bounce in early 2013.
Regaining compliance appears to fall under the prospectus filed two weeks ago by the Company. Within it, TTG Apparel, LLC and Tokarz Investments, LLC will be converting their Series A Convertible Preferred Stock into 28,405,331 shares of FOH stock, approximately 292% of the current outstanding common stock held by non-affiliates since insiders hold roughly 74% of the current 39 million shares outstanding. TTG Apparel, LLC and Tokarz Investments, LLC together own approximately 26% of FOH stock at present and are two of the largest shareholders in the Company outside of Fursa Alternative Strategies LLC and Arsenal Group LLC who collectively own 44% of the current issued and outstanding common stock and are controlled by William F. Harley, one of Frederick’s directors. Approval of the conversion is virtually guaranteed thus fortifying the short-term listing compliance on the NYSE MKT, aka Amex.
Strong sales for Q2, 2013, and compliance with the listing requirements all put FOH stock squarely on the list of strong candidates for a rebound in 2013. At their current level of around a quarter, a run to the 40′s or better would not be out of the question with Valentine’s Day also approaching rapidly.
About FOH Stock
Frederick’s of Hollywood Group Inc., through its subsidiaries, sells women’s apparel and related products under its proprietary Frederick’s of Hollywood® brand predominantly through its U.S. mall-based specialty retail stores, which are referred to as “Stores,” and through its catalog and website at www.fredericks.com. Click here to view the SEC filings for FOH.
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Bottom Line: Retailers have it tough in the current economy and the fact that sales barely fell during fiscal 2012 shows why FOH should be on your list of penny stocks for 2013. Sure the $1 level FOH stock had back in 2010 is more of a memory than it is a target, but half a dollar or better is a target level long investors may want to target for 2013.
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