The board of American Apparel has approved a motion to receive $15 million from a group of private investors because of low funds, Bloomberg reported.
The Los Angeles clothing company has plans to “double sales to $1 billion by expanding its brand, improving its distribution network and boosting wholesale revenue” according to Bloomberg.
American Apparel is known for its provocative ads targeting the teenage demographic. The company has a strong web-based ad network designed to target college students.
“I see their ads everywhere online. It’s always some half naked girl in the ugliest clothing trying to make it look good,” sophomore engineering major Ellery Murdock said.
The company’s shares have dropped 25% this year.
“Whenever I see an ad for them I think that they can’t possibly still be in business,” sophomore business major Michael Russo said. “Their ad campaign is just so limited. I don’t know how they expect to get results from these internet banners and pop up ads that try to use sex to sell clothing to college kids.”
The company lost $86.3 million last year. The finance deal includes stock warrants that could bring the value of the deal to about $40 million, Bloomberg reported.
“That market is already cornered by so many other clothing stores. If they’re already going under now, then I have no idea how they expect to bounce back without doing something drastically different,” Russo said.
The stock traded at an all-time closing high of $15.80 in December 2007, according to Bloomberg.
“Honestly, if their clothing was cheaper I might buy it,” Murdock said. “But they’re stupid if they think that college kids are going to buy an overpriced t-shirt from some online porn ad.”
Bloomberg reported that “the cash eases the threat of insolvency after the retailer, founded by Dov Charney, said last month that it’s at risk of filing for protection from creditors without better liquidity or an operational improvement.”
“It’s a shame that they are going to have to borrow so much money to even have a chance, but that’s the way of the business world,” Russo said.