American Apparel Inc. (APP): Is This Company’s Comeback Complete or Is it a Short Candidate?

Page 1 of 2

American Apparel Inc. (NYSEMKT:APP) has encountered some significant setbacks in the past six years since it started trading publicly, but is now showing some signs of life. The company is a manufacturer and distributor of basic fashion apparel. American Apparel is well known, in part, for its sweatshop-free business model, its form-fitting t-shirts, and often controversial advertisements. It has received some negative press over the past few years due to some issues with its founder Dov Charney. Charney became the target of numerous sexual harassment lawsuits in the mid-2000s. A number of these suits have since been dismissed, but some are still pending. The negative press hurt the company’s stock price, but more recently the share price has bounced back considerably. The decision for investors is whether American Apparel will continue to grow, or if it may be a short opportunity.

Charney began making basic t-shirts in 1991. He soon began instilling progressive politics into his business plan by promoting a sweatshop-free model of fair wages, and further refusing to outsource the manufacturing of the company’s garments to foreign countries. American Apparel currently has around 10,000 employees and operates over 200 retail stores in twenty different countries.

American Apparel’s Metrics

American Apparel Inc. (NYSEMKT:APP) still continues to operate at a loss. The company reported Q1 sales increased 4% to $138.1 million, on an 8% increase in comparable store sales and a 1% increase in wholesale net sales. The company further reported a loss of $0.7 million for Q1, versus a loss of $2.1 million for the prior year’s quarter. On an annual basis, net revenue increased 11% to $327.4 million in 2012, versus $294.9 million in 2011. The company further reported a loss of $0.35 per diluted share for 2012, an improvement from a loss of $0.42 per share in 2011. American Apparel Inc. (NYSEMKT:APP) recently refinanced a portion of its higher interest rate senior debt by entering into a $35 million credit facility with Capital One Bank.

American Apparel Inc. (NYSEMKT:APP) underwent a reverse merger in 2006 and was thereafter listed on the American Stock Exchange. The stock traded around $26.50 for most of 2006, until it dropped in December of that year to around $15.85. The shares finally hit an extreme low of around $.52 in December of 2011. Shares have since risen from the dead, and are up 93% year to date. Still, shares have backed off a high of $2.4 in late March. Recent price action has been flat, trading near $2 on low volume, and appears to be hugging the 50-day SMA. There is heavy short interest with 5.5 million shares being shorted, for a short float of 9.53%.

Who Do They Compete With?

Urban Outfitters, Inc. (NASDAQ:URBN)

American Apparel Inc. (NYSEMKT:APP)’s closest competitor in the retail fashion sector is Urban Outfitters, Inc. (NASDAQ:URBN). Urban Outfitters, Inc. (NASDAQ:URBN) has a much higher market cap of $5.99 billion, versus a market cap of $210 million for American Apparel. Urban Outfitters, Inc. (NASDAQ:URBN) has a P/E ratio of 23.76, with an EPS of 1.72, and recently reported that its first quarter fiscal year profit rose 39%.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!