The share price of
) increased almost 2% after it inked an agreement with New
York-based investment firm, Standard General LP, to bring in
financial support worth $25 million. The struggling apparel
retailer is reportedly going to use a portion of it to repay its
$9.9 million debt to Lion Capital.
As part of the deal, American Apparel will have to reshuffle its
board and include three representatives of Standard General on its
seven-member board. The company founder Dov Charney, who, in June,
was alleged of misconduct and misuse company funds, will have to
step down from the board in addition to three other members.
Additionally, two directors will be chosen jointly by Standard
General and the current board.
Ongoing investigation into Mr. Charney's allegations will
continue per the deal. Mr. Charney will serve as strategic
consultant until the end of the investigation.
Per the agreement, Standard General promised to support the
apparel retailer's sweatshop-free, "Made in USA" manufacturing
philosophy. The retailer employs about 4,500 workers at its
downtown Los Angeles factory. The financier aims to maintain this
facility and sell its products within the country.
Due to cheap labor available abroad, the U.S. market is flooded
with products manufactured outside. However, in view of the growing
unemployment in the country, 'Buy America' cries promoting goods
manufactured in U.S. are going strong.
Investors are encouraged with the deal which will provide
American Apparel with the much needed capital. The company has been
reporting lower earnings for the past few quarters due to soft
revenue and challenging retail conditions. Moreover, it will
dethrone Charney to the best interest of the company.
American Apparel currently carries a Zacks Rank #3 (Hold). Other
stocks in the apparel sector worth considering include
Christopher & Banks Corp.
Citi Trends Inc.
Men's Wearhouse Inc
) sporting a Zacks Rank #1 (Strong Buy).
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