American Apparel, the vertically integrated fashion giant that is often at the forefront of new styles and trends in youth culture T-shirt designs, accessories, and first layer pieces reported a complex 4th quarter financial results that indicate major changes could be on the horizon for the brand.
On March 25, American Apparel released their 4th quarter statement from 2009 indicating that net sales increased to $158.1 million from $145.6 million from the 4th quarter a year previous. 2009 net sales totaled $558.8 million, which was an increase of 2.5% from the year previous. They continue to do well not only in wholesale but their own retail category, which has challenged many other brands as they move into their own fashion retail space. In addition, American Apparel continues to be a leader in online consumer sales which the brand reported as remaining very strong.
However the “Made in Downtown Los Angeles” brand ran into immigration trouble resulting in the termination of more than 1,500 illegal manufacturing employees following inspections by the U.S. Immigration and Customs Enforcement. This resulted in “reduction of manufacturing efficiency” for the brand which has greatly affected the company and may cause a ripple effect for other brands competing in this category of fashion.
Here’s the most telling part of the report: “Based on the substantial impact of the reduced manufacturing efficiency experienced at the company’s production facilities beginning in the fourth quarter of 2009, and the high level of uncertainty surrounding the duration of the reduction in efficiency, as well as due to uncertainty stemming from the company’s constrained ability to undertake additional investments in its business as a result of certain restrictive financial covenants under the company’s credit facilities, the company has determined to defer providing annual financial guidance for 2010 until it reports its first quarter 2010 financial results in early May.”
Dov Charney, Chairman and Chief Executive Officer, stated: “Despite the many challenges our business faced in 2009, we delivered on our overall goal to generate significant cash flows from operations, resulting in a substantial reduction in debt in the second half of the year. I am pleased by the discipline that has been demonstrated in managing our inventory levels and by the focused capital expenditures made in 2009. Our main goals for 2010 are to enhance the productivity of our existing base of retail stores, re-establish our level of manufacturing efficiency at our production facilities, and to continue to broaden our management team to implement best practices throughout our organization. We continue to believe that the prospects for our brand remain bright and we look forward to bringing our products and our stores to many new potential customers in new neighborhoods and new cities in the decade ahead.”
For information on how American Apparel ranks among 13-25-year-olds in North America, please contact us about the Spring Youth Culture Study 2010, released earlier this month.
