Blog: Can eBay rescue American Apparel?
Leonie Barrie | 27 July 2011
Are things finally starting to look up for American Apparel? Not only has it just signed a deal with eBay to start an online shop - which CEO and founder Dov Charney confidently believes could be worth millions in its first year - but it is also expanding its presence in Europe with department stores Selfridges in the UK and Galeries Lafayette in France.
There's no doubt the Los Angeles based manufacturer and retailer needs all the help it can get just now. It is currently battling to turn around sagging sales - retail revenues fell 8.2% to $72.7m in the three months to 31 March, with same-store sales dropping 8% over the same period - and has had to secure $14.9m in new financing to stave off the threat of bankruptcy. It was also warned earlier this month that its board makeup does not comply with NYSE Amex Exchange listing regulations.
And if that wasn't enough, Charney is also facing a $250m fine after a former employee filed a sexual harassment lawsuit against him.
Even though the firm reported flat second quarter revenues earlier this month, Charney bullishly proclaimed: "We believe ours will be a story of improving sales, improving margins and improving EBITDA." Quite how it's going to achieve this remains a matter for speculation.
Aggressive expansion into new markets and opening new distribution channels means that around 40% of American Apparel's stores are now located outside the United States. And with an estimated 30,000 searches for American Apparel on eBay each month, the aim is that the new online store will take the brand to untapped audiences.
Another ray of hope must come from the fact that online sales increased 19% in the company's second quarter - yet still account for less than 10% of its total revenues.
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