American Apparel Gets Good News But Charney Drama Goes On - Holiday Central

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It's a make-it or break it time for retailers. The holiday selling season is always a critical time for retailers, but this year this may be even more true. With several retailers already falling victim to a drop in consumer spending, and filing for bankruptcy, retailers will be navigating through some tricky waters. Consumers are strapped for cash due to high energy and food prices, and unemployment is rising. The recent credit crunch has made it more challenging for retailers and consumers to borrow.

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Jun.25

2:41 PM ET

Wednesday, 25 Jun 2008

American Apparel Gets Good News But Charney Drama Goes On

Posted By:Margaret Brennan

Topics:Consumers | Retail Sales

Sectors:Personal and Household Goods | Retail

Companies:Sears Holdings Corp | Talbots Inc.

Oliver Quilla for CNBC.com
Good news for American Apparel [APP Loading... () ]:the company was able to reach an agreement on a new mended credit agreement with its lead bank.

It is a positive in this tight lending environment to see a company lock in a credit line or letter of credit. As we’ve seen with Talbots [TLB Loading... () ] and Sears Holdings [SHLD Loading... () ], loss of a credit agreement can hit a stock and cost the company equity even when retailers don’t need to tap that credit.

As shareholder Steven Birenberg of Northlake Capital Management wrote me, this agreement includes a couple of positives for the company. Mainly that it “allows for execution of the recently announced stock repurchase announcement” and…” although not a “fact” it is notable that a company without a full-time CFO, in violation of Sarbox, and with admittedly weak finance expertise got the deal done.”

Birenberg reads this as a sign that confidence in American Apparel’s sales numbers and management team could be a bit higher than some say.

American Apparel: Update On Continuing Saga

William Reinhardt of Miller Tabak also is more positive on the stock. He writes “this stock is beginning to look really cheap. I’m not a retail analyst, but with a 52% year-over-year increase in net sales, same store comps around 24%-27% for the past few months, and a P/S ratio of 2.4x its hard to think that the pressure on the stock is truly justified.”

Thanks to all of the readers like who wrote in to Retail Detail about APP as an investment opportunity. You’re on all sides of the trade and I enjoy hearing your insights. Since I’m a journalist, I can’t give you an opinion on the stock and its merits as an investment. A few of you have asked my opinion but I can just tell you what is going on with the company itself. For what it is worth, CNBC also contractually bars all on-air employees from investing so that we don’t have any personal stake in how a company performs or interest in influencing public perception of it.

While APP’s business outlook may be improving, the legal challenges confronting CEO Dov Charney are not. Retail Detail reader Jean Mcvan drew my attention to yet another sexual harassment lawsuit against Dov Charney that was filed in LA Court. I haven’t seen anything posted on the SEC site so far but TMZ actually posted the court documents online.

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