Apr '11
Business Update
Tom Casey, Acting President, of American Apparel stated: "2010 was an extremely challenging but productive year. We suffered the after-effects of a major labor disruption resulting from an immigration intervention in 2009. The disruption of our 2010 production schedule resulted in significantly higher production costs per unit and late deliveries of products to our stores and to our wholesale clients.
In addition, we encountered extraordinarily challenging world-wide economic conditions. We also experienced higher yarn and fabric costs in the second half of 2010. These factors along with a weak retail environment and intense competition resulted in weak comparable store sales and a lower EBITDA."
"In spite of adverse circumstances in 2010, we achieved a number of important objectives through March 2011:
• Recruited, hired and trained over 2,700 new factory workers since the second half of 2009. As a result of their tenure and training we have seen an overall improvement in our manufacturing efficiency in the fourth quarter of 2010, and expect these trends to further improve in 2011.
• Hired three new senior executives over the past six months. Last October, I was hired as Acting President to build the operating management team and bring additional operating disciplines to the business. In February 2011, John Luttrell joined the Company as Chief Financial Officer. Marty Staff joined American Apparel in March 2011 as Chief Business Development Officer. Marty Staff has a long history with leading designer brands and is focused on driving top line. Together, the new management team is working closely with Dov Charney to drive sales while improving efficiencies in inventory and operating costs.
• Made strategic investments in technology including installation of RFID in 28 stores with a total of 35 stores now on RFID. RFID uses radio frequency scanning to help control accuracy and flow of inventory. We installed traffic counters and security cameras in 100 stores and completed installation of anti-theft tagging in 223 stores globally. In addition, we implemented advanced labor scheduling and optimization for both manufacturing and global retail. These investments will enhance our ability to support inventory of hot sellers, improve store execution, reduce shrink and lower operating costs.
• Online sales growth at 25% in 2011 and tracking to that objective in the first quarter. We have improved our online customer experience through a new website which affords better presentation of our high quality fabrics. We have also improved customer satisfaction by significantly reducing backorders.
•Expanded our offering of fashion forward items to enhance our core basics and reinforce the strength and relevance of the American Apparel brand. Best-selling new items include lace and chiffon dresses, skirts and tops as well as wovens such as shawl cardigans and the fisherman's pullover sweater along with accessories. In the second quarter we are launching our first indigo denim product, a high wasted jean for women.
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