Shop Talk
Retailers, consumers and prices
Check Out Line: Ron Burkle invests in yet another challenged company
Check out Ron Burkle’s continued affinity for companies in trouble.
The supermarket magnate has taken a 6 percent stake in American Apparel, according to a regulatory filing on Thursday. That’s the billionaire’s latest investment in iconic companies that just can’t seem to get back on track.
The apparel maker and retailer, founded and run by the colorful, often scandalous Dov Charney, came close to tripping a loan covenant with its creditors but reached a deal yesterday, averting disaster.
Burkle has also upped his stake in Barnes & Noble, whose sales are still trending downward despite the popularity of its Nook e-reader, in recent months and is battling with the Riggio family for control of the bookseller. He owns nearly 20 percent of Barnes & Noble and fought, unsuccessfully so far, to double his take without triggering a poison pill. Tuesday’s annual shareholder meeting promises to be colorful.
But Burkle has also been reported in the past to be interested in stakes in big names such as the New York Times and upscale retailer Barneys. Maybe he sees these brand-name companies as able to turn things around under the right influence: his.
Check Out Line: Lifeline for American Apparel?
Check out the expected financial lifeline at American Apparel.
Sources expect the company, known for its colorful T-shirts, spandex leggings and other edgy, “Made-in-USA” retro appeal, and its main backer, British-based private equity firm Lion Capital, to reach an agreement that will prevent American Apparel from a looming debt covenant breach.
Last month, American Apparel lost nearly half its value after announcing it might trip a second-quarter covenant on June 30.
American Apparel does nails for holiday
By Nivedita Bhattacharjee
American Apparel is getting into the cosmetics business just as the holidays come knocking.
The company, known for its colorful T-shirts and other apparel worn by cool urbanites, announced the launch of Nail Lacquer – its first foray into cosmetics manufacturing.
Check Out Line: Holidays not looking so holly, jolly
Check out the lackluster start to the holiday season for major U.S. retailers.
The Thomson Reuters same-store sales index rose 0.5 percent in November, while Wall Street experts had been expecting 2.1 percent growth, and 81 percent of companies missed expectations.
Talk about shaking Wall Street’s optimistic belief that this year’s holiday shopping season would be off to a much stronger start than in 2008, when the global economy seemed to be in free fall.
Check Out Line: Which way is up with the U.S. economy?
Check out the mixed messages about the U.S. economy from the various consumer earnings.
Like any other earning day nowadays, it’s pick your poison on whether you want to focus on the good news or the bad news when it comes to whether the economy is improving.
Job cuts at American Apparel: more than just meets the eye?
By Nivedita Bhattacharjee
American Apparel Inc, that hip clothier to urban youngsters which proudly advertises its “made in downtown LA” and “sweatshop free” policies, decided to dismiss about 1,500 of its factory workers last week as they could not submit proper immigration papers.
The Los Angeles-based company ran into trouble in June, when a federal probe found that about a third of its workers had supplied suspect or invalid records and were not authorized to work in the United States. Then, last week, the company “let go” about 1,500 of them.
Though CEO Dov Charney, a Canadian immigrant, promises the dismissed workers “priority treatment, in terms of being interviewed for future positions with the company,” once the workers get their papers in order, and also said he’s disappointed by President Obama’s administration for having failed to bring up immigration reforms, some industry experts think there’s more to the mass dismissals than meets the eye.
“I want to give them the benefit of doubt and say, yes, those people don’t have the papers so they have to cut down on the jobs, but it’s almost too coincidental in my eyes to sit there and say, okay, all the growth of the new stores are cut, the inventory is up, and why is this happening this minute?” said Marshal Cohen, chief industry analyst at market research firm NPD Group.
In August, the company cut its sales forecast, and said it might also post a full-year loss.
“It’s all about speed-to-market for American Apparel, it’s about trying to get the products into the stores as fast as possible,” NPD’s Cohen said. He added that with so many workers out there would be a change in dynamics for the company, but he said production should not be hampered much, as the company needs to cut back on that anyway, as sales slow down.
“This is one unusual retailer, in that they are so tied to production to sales. So, the minute sales start to feel the pain, they got to instantly turn the faucet off, else they’ll flood the sink!”
American Apparel did not respond to an email asking for their take on Cohen’s view.
Last week, Charney wrote a farewell letter to employees and posted it on his site in English and Spanish.
Check Out Line: Want growth? Buy up.
Check Out retail strategy for growth.
A list of the top 10 companies from a “Hot 100 Retailers list” compiled by Planet Retail for the National Retail Federation showed that while a few companies grew organically, most grew as a result of a merger or acquisition.
Topping the list of companies that grew through a deal was DineEquity, which bought Applebee’s last year.
Check Out Line: American Apparel’s British invasion
Check out the Lion’s share of American Apparel.
OK, so it’s not getting majority ownership. Still, American Apparel, known for bright tees and sultry advertising, said Lion Capital LLP invested $80 million.
“In light of unprecedented market conditions, we believe Lion Capital‘s investment serves as a strong endorsement of our company and the tremendous potential of our brand,” said American Apparel founder and CEO Dov Charney.
American Apparel shares, which trade on the AMEX, shot up almost 33 percent to $1.98 in morning trading.
Lion Capital, based in London, gets to bring two people onto the board. It also gets warrants for shares, that if converted into common stock, would give the firm about an 18 percent stake in the clothing retailer.
Drug stores top hot list with acquisitions
(Due to a tabulation error in the research, STORES Magazine has issued a corrected list. This is being corrected to remove Coldwater Creek from the Top 10 list and replace it with Citi Trends at No. 10)
Though the retail industry cooled last year to its slowest growth since 2002, a number of retail companies experienced fiery growth, according to the National Retail Federation. The hottest retailers, in general, grew through acquisitions, according to the trade group’s STORES Magazine.
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