This doesn't have anything to do with clothing ads that would make much of State College, Pa., uncomfortable or sexual harassment suits against CEO Dov Charney. American Apparel's monetary weakness is much more worrisome than its moral standing.
The company stretched three stores and $82 million in revenue in 2003 to 260 stores and $545 million in 2008. That performance sagged more quickly than a pair of cheap leggings. Revenue dropped $533 million last year, profit fell by $20 million from 2008 to last year, the company turned $14 million in net income into an $86 million loss during the same period and its stock price cratered from a $15-per-share high in October 2008 to roughly 75 cents today.
It took a $14.2 million cash infusion from a group of investors led by Canadian financier Michael Serruya and Delavaco Capital back in April to stave off bankruptcy and an assist from eBay (EBAY) in July to bulk up its online sales. Net and same-store sales over the past nine months are up slightly from last year, but the company's still operating at a net loss.Buying an American Apparel gift card isn't worst decision a consumer could make this holiday season. Considering there are specialty clothing retailers out there with none of American Apparel's financial woes or uncertainty that haven't been scolded by the NYSE's Amex Exchange to bring their board into compliance, there are better ways for shoppers to cover their bases than with this company's thin fabric.
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