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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!