American Apparel Falling Off the Pedestal

A one-time darling of the U.S. retail industry, American Apparel is reportedly going through some tough times, according to a story in The New York Post. Just last week, the company reported that profit in the fourth quarter of 2009 fell by more than 20 percent. Sales for the first quarter of this year are expected to be down 10 percent on a year-over-year basis.

Some of the company's fans would like to blame its lackluster performance on the tight financial controls exercised by American Apparel's private equity stakeholder Lion Capital, which is reportedly preventing the chain from investing in new technology and equipment. But does anyone out there think American Apparel's product selection is to blame? There are several American Apparel stores near Retail Traffic's office in Chelsea and I visit them from time to time. Not once in the past four years have my visits ended in an actual purchase. There is nothing wrong with the merchandise per se: we all know it's basic t-shirts and tunics and leggings. But when there are about 20 other stores within a five-block radius that sell exactly the same thing, often at lower prices, and often in a more compelling store environment, why shop at American Apparel?

What does everyone else think? Will American Apparel survive its rough patch? Does it have to reposition itself? Would you take a bet on them as a tenant right now?

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