American Apparel gets pumped-up with a cash infusion by Lion Capital
In this month’s retailer round-up you can see some obvious trends if you look at the youth culture market landscape. Overall, there are some seriously wide results from those doing well to those doing very badly, which indicate significant change in the industry as a wholel. Here’s the March recap:
American Apparel was up on some hefty deadlines for getting investment capital and they got it, right under the gun, phew! On March 13th, London-based private equity firm Lion Capital LLP invested $80 million into American Apparel, the vertically integrated manufacturer based out of Los Angeles. As we’ve profiled, American Apparel is one brand that continues to be a strong favorite among youth culture, and has literally launched the blank-branded movement that so many other brands now try to follow. The trajectory of preferences for American Apparel, the brand, and store, among 13-25-year-olds in North America and Europe, as reported in our Global Youth Culture Studies, continues to show that there is innovation and market opportunity in some of the most obvious of places -the 1st-layer apparel industry–and now of course, expanding into many other directions.
Here’s what American Apparel CEO and Founder, Dov Charney had to say, “We are excited that Lion Capital, a leading private equity firm in the consumer sector, has decided to make a substantial investment in American Apparel. In light of unprecedented market conditions, we believe Lion Capital%uFFFDs investment serves as a strong endorsement of our company and the tremendous potential of our brand. This investment provides us with a long term solution for our capital structure and an enhanced ability to grow our brand both domestically and internationally over the coming years. Lion Capital%uFFFDs singular focus on the consumer sector and their extensive experience with growing consumer brands makes them an ideal partner as American Apparel continues to develop into a leading, global apparel brand.”
On St. Patrick%uFFFDs Day, March 17, American Apparel reported their 4th quarter earnings which had profits up 30% with sales up another 31% prompting Lizard Capital Markets to re-iterate their statement to “buy.” For more, read Label Networks new Brand Profile Report on American Apparel and youth culture preferences, including top T-shirt brands, from North America and Europe.
Quiksilver has been watched like a hawk over the past year with much speculation that it will sell one of its brands, most likely the most successful one DC Shoes, that it seems as though it just has to occur at some point. On March 11, Quiksilver reported that their first quarter which ended January 31, 2009 was down 11% to $443.3 million from $496.6 million in the first quarter of 2008. According to Bob McKnight, CEO of Quiksilver, “While our performance in the quarter was in line with our overall expectations, deteriorating macro conditions made for a very difficult operating environment. Weak consumer traffic drove lower sales and margin compression which resulted in a loss for the quarter.”
Perhaps the most telling aspect of Quiksilver’s fiscal report is that Quiksilver is trying to explore ways of improving its liquidity position and capital structure. Part of this was accomplished, on a short term, with Quiksilver’s European banks extending the maturity of it’s 55 million Euro loan by 3 months to June 30, 2009. The company has also hired Peter J. Solomon, an investment bank, to help explore various options to improve Quik’s liqiuidity situation. So again, rumors are speculating that Quik is looking to sell DC Shoes, Roxy, or Quiksilver overall.
Then on Tuesday, lucky St. Patrick%uFFFDs Day, things got junkier for Quiksilver when Standards & Poor came out with a new lower rating from B to B-. Not a good thing when you%uFFFDre trying to raise capital and improve liquidity.
Hot Topic, as we also profiled, continues to do well despite the economic struggles that many companies in the youth culture marketplace are having. We saw this coming a mile away and have reported on it in our North American Youth Culture Studies, among other places. On March 11th, Hot Topic reported that it’s profit rose 19% as sales rose 8% to $238 million. The mix of band merch, accessories, and music-inspired apparel and brands continue to capture the demento mori youth market, especially as spring and summer music tour season is about to kick-off. Now with Hot Topic’s ShockHound selling music, this accounts for another successful strategy for the retailer/brand in terms of merchandising, which, as Urban Outfitters also figured out, is a key component to attracting young people today.
Unfortunately, American Eagle Outfitters can’t seem to get the fashion styles right and are in a slump, which is the same for the tired brand Abercrombie & Fitch. Both need to revamp what they offer but in the case of Abercrombie & Fitch, like American Eagle, new targets need to be for lower or “value” priced apparel. To help compensate for a 77% decrease in 4th quarter profits, American Eagle ran an “under $30” jean promotion in February and changed it’s merchandising in women’s denim to concentrate on fit, while expanding it’s dress line from 10 style choices to 40 for Spring.
Back over at action sports again, Zumiez reported on March 12th that it’s 4th quarter profits fell to $6.3 million or 21 cents per share (ouch), from $12.4 million or 42 cents a share from a year ago in the same period. Overall revenue fell from $125.5 million from $126.6 million last year.
For Pacific Sunwear, they too have had unfortunate losses as reported on March 12th with a fourth quarter loss of $27.1 million or 42 cents a share. Revenue overall slid from $351.7 million from $384.3 million a year ago.
Aeropostale on the other hand, actually had an increase in their 4th quarter report with net income rising to $68.2 million from $64.7 million a year ago for a total revenue increase to $690 million from $591.3 million last year.
And to top off our March Retailer Round-up, Charlotte Russe, the famous teen retailer, is up for sale. No buyers yet.
(Volcom just dropped a new report–check back tomorrow for the update).
For more information on Label Networks’ Profile Reports on American Apparel, H&M, Hot Topic, email info@labelnetworks.com; (323) 630-4000. These reports are free for Premium Global Youth Culture Study subscribers.
