Case Study: American Apparel Case

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Case study of American Apparel INC. Interpretation of Management and Financial situation 11/24/2014 By: Group 8 (SEC: B) Vivek Kr Sharma SMBA 14081 YSR Raghav SMBA 14070 Monty Singh SMBA 14038 Pratip Sinha SMBA 14089 Mohd. Wasim SMBA 14036 Case Facts – 1) American Apparel, a once upon a time prominent clothing line brand is now facing a major cash crunch as on April, 2014. 2) This is because they need to pay 13.4 billion USD as interest and have lots of other debt repayments. 3) The CEO Don Charney raised additional capital of 28.5 million USD by selling 61 million shares at only 0.50 cents per share. The buyer Johannes Milo Roth had the 2nd highest shares of the company next to the…show more content…
8) 2013 should be the darkest year for American Apparel till date. Net loss has reached an all-time high with 106 million USD in 2013, which is a 400% increase compared to only 37 million USD in 2012. The year was more disastrous because their operating expense was too high due to strategy for inventory management and finishing the E-Commerce platform. The service via E-Commerce wasn’t up to the mark because it was underprepared leading to further loss. 9) The sales of the company have increased relatively in 2013 but it is cancelled out by their exorbitant net loss. 10) Currently, share price also has fallen down from 17$ to only 0.56 cents leading to the company to lose more than 80% of its share value. 11) In the first quarter of 2014, net sales came down to 137.1 million USD and Gross Profit came down to 72 million USD compared to the first quarter last year. This impact was due to heavy competition. 12) About the Apparel industry in general, it has been highly volatile and inconsistent of late. 13) The CAGR has been (0.5%) in the USA and has been 1.4% overall. The industry has grown by a very meagre 1.6%…show more content…
The promiscuous and sexually exploitative advertisements of American Apparel created shock value back in the day. It helped in their marketing by appealing to a young audience. However, several conservative minded investors and buyers would refrain from investing or buying from such a company with a very awkward image. Has the American apparel lost it appeal, and the CEO DovCharney lost his charm? American Apparel has lost its appeal from a financial standpoint. Investors will get cold feet in investing for a company whose share prices have gone rock-bottom. The company can only attract an investor who is willing to buy the company out and use its features for its own use. The company however, hasn’t lost its appeal when the general public is concerned. The revenues have been increasing every year, although marginally. That means it has managed to retain its customers and add a few new ones. CEO Dave Chavney has lost his charm because he doesn’t have a Plan B when it comes to changing the direction of the company to positive note. However, he is instrumental to the company because he is using every last effort to avert disaster by

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