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Full speed ahead for American Apparel

The clothier reports big increases in sales and earnings and says it will accelerate its expansion plans.

August 15, 2008|Swati Pandey | Times Staff Writer

American Apparel Inc., a clothing maker and retailer with an edgy image, reported Thursday that sales soared 39% in the second quarter and said it was accelerating its expansion plans despite the weak economy.

Net income jumped 42% to $6.8 million from a year earlier as the Los Angeles-based company's more-profitable retail sales grew faster than its wholesale business.

"It's one of the few companies in retail generating extremely strong growth at high-quality margins," said Todd D. Slater, an analyst with Lazard Capital Markets.

Or, as Chief Executive Dov Charney said during a conference call with investors, "Our stores are hot right now."

The results, which were released late in the day, sent the company's stock as high as $7.10 a share in after-hours trading, up 8.6% from its price at the end of the regular trading session. But it remained 55% below its high of $15.80 set in December.

Net income totaled $6.8 million in the latest quarter, up from $4.8 million. Earnings per share were unchanged at 10 cents because the number of shares outstanding rose as part of a complex transaction that turned the clothing maker into a public company last year.

Total sales rose to $133 million, with sales at the company's stores climbing 58%. At American Apparel locations open at least a year, sales rose 23%. The company added 1,400 manufacturing employees in the second quarter, boosting its workforce to 9,000 people.

"I think we've really sustained the economic slowdown well," Charney said.

The company said it would open 50 to 55 stores this year -- including locations in China and Brazil set to open in the coming weeks -- up from a previous estimate of 40 to 45.

The retailer added 20 stores in the first seven months of the year, giving it about 200 locations worldwide.

Part of that expansion will be an exploration of U.S. shopping malls as American Apparel takes over a few former locations of specialty retailer Sharper Image, which filed for bankruptcy protection in February.

Charney said the company would also broaden its product line beyond plain cotton basics and trendy nylon clothing by adding menswear and heavier outerwear.

But Matthew Wiger, an analyst at research and trading firm Monness, Crespi, Hardt & Co., predicted the company would seek to retain its "urban-metro" image.

That image can continue to serve American Apparel well, Lazard's Slater said.

"It's almost the anti-brand," he said. "And that has a great appeal to a widening audience."

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swati.pandey@latimes.com

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