American Apparel

http://www.sec.gov/Archives/edgar/data/1336545/000119312509174404/d10ka.htm http://www.sec.gov/Archives/edgar/data/1336545/000119312509230187/d10q.htm http://www.sec.gov/Archives/edgar/data/1336545/000144530510001313/app0930201010q.htm

Part 1:

As I reviewed the available financial statements from 2007-present, the company began to decline in the late 2008.  However, the causes of the decline began with American Apparel CEO, Dov Charney, being involved in several sexual harassment in the mid 2008s. Since lawsuits have yet to be proven, their sales were still decent, which resulted in American Apparel beginning to stockpile their inventories during 2009. However, more sexual harassment cases popped out later in 2009, which could possibly be why many customers lost trust in American Apparel’s image, causing its downfall. However the critical point of its downfall seems to be American Apparel being involved in illegal immigration issues.  American Apparel has been hiring experienced illegal immigrants, which has been discovered in 2010. As a result they terminated 1500 experienced workers causing its downfall in sales. They weren’t doing so well in 2009 and survived until 2010 where they almost got into bankruptcy. However they borrowed an $80 million loan just to escape a looming bankruptcy.

Part 2:

I personally think the $14 million cash should be used in investing activities such as advertising because American Apparel must refresh their image of semi-pornographic into a healthier image which could be accepted more easily by the public. The advertisement from American Apparel has been stepping past the border line therefore receiving many critics.  Also advertisement can send a message to the public that American Apparel is still a powerful company and continuing to operate. Some money could be used into R&D to grab the attention of new customers and previous customers who have left American Apparel. With a new image American Apparel would be able to gain back its original popularity and a healthier reputation. Once the company is back on track, revenue would be coming in and expansion could happen in the future.