American Apparel - Case Study Analysis Essay

2236 Words Nov 28th, 2014 9 Pages
Accounting for Decision Making
American Apparel: Drowning in Debt?
Case Study Analysis






Prepared by Group 7-section A:
Ambika Ravi Shankar - 14009
Ashish Sopori -14018
Ashvita Ganesh - 14020
Tamilarasi Rajappa – 14066
Pragadeeshwaran Selvaraju - 14075



Introduction

American Apparel, is an American multi-national clothing manufacturer, distributor and retailer since 1988based in Los Angeles, California. Dov Charney, a Canadian business man was a founder and former CEO of the company. He was involved in nearly every part of the business process from design and manufacturing to marketing. The Ernst & Young named Charney Entrepreneur of the Year in 2004. He was also termed "Man of the Year" by various fashion
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The operating income also fell from $24 million to a negative $50 million which was a significant drop in the profitability by exorbitant 300%.

3) Shattered by the losses and lack of liquidity, the money situation worsened by the first quarter of 2011, and the company stated that it might file a protection against bankruptcy under section 11.

4) The net loss restrained to $39 million in 2011 as compared to $87 million in 2010.

5) In year 2012, the company undertook efforts to upgrade the production forecasting and allocation system, which led to total net loss decreasing from $39 million to $37 million in the year 2012. The sales also started building up. The net sales of the company increased from $547 million to $617 million in 2012.

6) The company implemented two important strategic initiatives in the area of inventory management and the new distribution center in 2013. It also completed its RFID system and implementation of oracle, ATG web commerce application, for its e-commerce platform leading to significant increase of operating costs. The cost of goods sold increased from $289 million to $ 313 million, crushing both net and gross margins.

7) The net loss increased to $106…

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