Lion Capital has made an investment of $80 million in American Apparel in the form of notes and warrants expiring in March 2016, entitling it to 18 percent of the capital if converted into shares. Without this equity infusion, the company might have been forced into Chapter 11 bankruptcy, according to local reports. Based in London, Lion Capital has made investments in companies such as Jimmy Choo, Orangina Schweppes and Weetabix in the past.
The 11-year-old vertically integrated Los Angeles-based apparel company, known for its focus on the use of eco-friendly materials and manufacturing its colorful basics in the U.S., plans to use the proceeds to pay down debt and to continue to expand both in the U.S. and elsewhere. It expects to open only between 25 and 30 new stores this year, down from the 78 new doors added in 2008.
The company already has more than 260 stores in 10 European countries as well as in the U.S., Japan, China and other parts of the world. The new store openings helped American Apparel to report net sales for the fourth quarter ended Dec. 31 up by 31.0 percent to $145.6 million. Total retail sales increased by 52.7 percent to $98.0 million for the quarter, with comparable store sales rising by 11 percent. The operating margin for the quarter was 5.7 percentage points higher at 6.3 percent. Net income increased by 30 percent to $3.9 million.
American Apparel expects consolidated net sales for 2009 in the range of $575 million to $600 million, and income from operations in the range of $55 million to $65 million. For the full 2008 financial year, American Apparel’s consolidated net sales grew by 40.8 percent to $545.1 million. Total retail sales were up by 61.8 percent to $341.3 million. Comparable store sales rose by 22 percent for the year. Sales outside the U.S. soared to $146.5 million from $84.5 million the year before, with retail sales and online consumer sales nearly doubling to $119.7 million and $12.2 million, respectively.
Operating income for the full year increased by 16.1 percent to $36.1 million, but the operating margin was down by 1.2 percentage points to 6.6 percent, which includes a 2.4-percentage-point drop for special expenses. American Apparel ended the year with net income down by 9.0 percent to $14.1 million, but adjusting for the compensation expense, the company had an increase of 47.7 percent to $22.9 million.
