For a clothing company with fashions that tend to resonate best with young, hip consumers, American Apparel Inc. had surprisingly low online sales – until now.
Last week, the downtown L.A. manufacturer told investors that it will put more emphasis on growing its online sales in the next three to five years, alongside expansion plans for its brick-and-mortar retail and wholesale divisions.
Eric Beder, an analyst with Brean Murray Carret & Co. in New York, said he thinks it’s about time the company has made online sales a priority.
“Historically, online sales haven’t been a big emphasis for them, though you would think that, with young customers, it would have been a bigger focus for them,” he said. “It’s a big growth opportunity for the company.”
The announcement came as the company reported that online sales grew 42 percent in the fourth quarter to $18.5 million compared with the same period a year earlier. Online sales for the year rose 30 percent to $55 million. E-commerce now makes up about 12 percent of the company’s total retail revenue.
In the last year, the company began using more user-friendly software to help ramp up online sales.
Beder said the software is already working.
“It enables them to be more aggressive in offering new products and make a much more professional site,” he said.
American Apparel was the biggest gainer on the LABJ Stock Index last week, up 46 percent to $1.88. (See page 38.) In the last year, the stock has climbed 158 percent.
That’s because the fashion company last week reported net income of $4.9 million, compared with a loss of $11.2 million in the same period a year earlier. Revenue rose 10 percent to $173 million and same-store sales rose 7 percent.
Analysts believe the company continues to rebound after years of dealing with the effects of a down economy on top of having lost much of its work force to an immigration raid in 2009.
David King, an analyst who covers American Apparel for Roth Capital Partners LLC in Newport Beach, said the company’s vision for growth in online sales, coupled with continued growth in its retail store footprint and wholesale business, should be encouraging to shareholders.
“With all of those things, investors could extrapolate pretty strong profit potential down the road,” he said.