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September 04, 2008

American Apparel Story Gaining Credence

The recovery in American Apparel continues as the stock crossed $10 yesterday for the first time since the beginning of April. The stock bottomed out below $6 in late July and August. The latest catalyst was August comp stores sales which reported yesterday at 31%! APP has been comping at or above this level all year. The store bas is young and small so I expect comps to remain very healthy although they will obviously slow. The latest comps follow a very strong and clean 2Q08 and solid conference call in mid-August. The chart looks great. I think the shares can work to at least $11-12 on a strong 3Q driven by back to school which is a key focus for this teen-oriented retailer. Plenty of shorts here thanks to the accounting issues and actions of controversial CEO Dov Charney. I've felt it was a risk worth taking given the outstanding store level execution. It appears that the investors are finally giving more weight to operating fundamentals as confidence in management builds.

Posted by Steve Birenberg at September 4, 2008 04:04 PM in eda