American Apparel Reports Profit Drop

Los Angeles–American Apparel Inc., the retailer who champions fun, colorful, American made clothes and accessories, reported its fourth-quarter profit fell 21% to $3.05 million. The 281-unit chain’s stock also has fallen to less than half its high of $6.97 in April 2009.

While the chain’s chief competitors, such as H&M, Gap and Urban Outfitters have been performing well, American Apparel may have been hurt because it offered few discounts or promotions to its cost-conscious consumers. The Los Angeles Times reports that lenders kept a tight leash on costs, causing the company to struggle to expand. Manufacturing capacity is down, too, since the retailer was forced to dismiss 1,500 workers from its downtown Los Angeles factory last September.

“The core fundamentals continue to deteriorate,” says Lazard Capital Markets analyst Todd Slater who told the Times that while “he is skeptical about the company’s current financial health he is a believer in its long-term viability.”

The specialty store’s sometime controversial Dov Charney remains optimistic, however. “There are a lot of things we learned from this year. It’s a very sophisticated business model, but it’s in its infancy. There’s probably another five years of work here before we can say that we’ve landed the plane.”

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