American Apparel stock down after manufacturing issues

By TIFFANY MONTGOMERY

American Apparel’s stock price was down nearly 10% in premarket trading this morning after the company declined to provide guidance for 2010 because of manufacturing problems.

The company said yesterday that the forced layoffs of 1,500 experienced manufacturing workers in the fourth quarter after an immigration investigation reduced production efficiency and hurt profits.

American Apparel said there was “a high level of uncertainty” about how long the production inefficiency will last.

The company also said because of restrictive bank covenants, it was unclear how much additional investment it could make in its business in the current year. Thus the company does not know how many stores it will open in 2010, which also impacted its ability to provide annual guidance until the first quarter earnings release in May.

The company did say it expects same store sales to decline 10% in the first quarter.

Fourth quarter results

Net sales: up 8.6% to $158.1 million

Retail sales: up 10.4% to $108.2 million

Same store sales: down 7% in constant currency

Total number of stores: 281. The company opened 21 new stores in 2009.

Wholesale sales: up 6.1% to $38.5 million

Online sales: flat at $11.4 million

Gross margin: 55% vs. 54.5%, thanks to currency fluctuations.

Net income: down 23% to $3 million.

2009 results

Net sales: up 2.5% to $559 million

Net income: down 92% to $1.1 million. A $13.2 million merger-related, stock based compensation expense impacted earnings.

Cash: $9 million

Debt: $83.4 million