The New York Post stuck to the usual script when describing American Apparel’s new $80 million credit facility from Crystal Financial, which is backed by George Soros: CEO Dov Charney’s company is a “financial disaster” that’s “entangled in lawsuits with young, beautiful women”; the loan helped Charney avoid the “prospect of a bankruptcy,” and thus “Dov has dodged a very big bullet this time.”
This, after all, is the company whose CEO has a reputation so comical that he survived the discovery of nude pictures of him floating around the internet.
While it’s true that AA has been an infamous disaster area under Charney—the stock remains under $1— much has changed at America’s most infamous apparel advertiser in the last year.
AA has turned itself around. Its total sales are growing. Most of its segments (wholesale, internet, international) except the U.S. retail division are expanding nicely—and Charney has taken a knife to that division.
Here’s the case for American Apparel, and why the Soros/Crystal millions—loaned at a higher rate of interest than the 15 per cent line from Lion Capital it replaced—looks like a great bet.
The stock: APP trades at less than a dollar today, the same place it's been for years. It has yet to react to the changing sales picture at the company.
The topline is going up. AA is once again a growing company. Its reputation has yet to reflect that, however.
People think the company is shrinking because of its overbuilt U.S. retail footprint. All the other segments are growing, however.
The result: Growth in Q4 even within the U.S. retail segment, which in the last couple of years was AA's worst performer.
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