California Apparel News

As details of American Apparel's impending acquisition are solidified, the vertically integrated manufacturer and retailer announced plans for a new store concept launch in the United States. On Nov. 17, the Los Angeles–based maker of casual basics will open California Vintage, a new retail division that will sell a mix of men's and women's vintage apparel, shoes and accessories as well as some American Apparel–branded pieces.

In October, American Apparel opened two California Vintage stores in the German cities of Berlin and Cologne and another in June in Mexico City.

quot;We had amassed so much vintage clothes, which we used for inspiration, that we realized we could open a store if we wanted to,quot; said Iris Alonzo, a creative director at American Apparel who managed the creation of the store concept and launch. quot;It seemed like a natural progression for us.quot; And, she added, American Apparel's typical hipster client is already a vintage consumer. quot;They don't want to wear head-to-toe American Apparel or vintage, but a mix of the two works really nicely.quot;

According to Mathew Swenson, American Apparel's fashion media director and brand strategist, while the overseas California Vintage stores are more quot;makeshift,quot; the Los Angeles store will launch with a quot;more focusedquot; concept. quot;We're taking what we learned from the other stores, which served as tests, and applying it here,quot; he said. That means vintage offerings will be carefully edited to track current trends, and near-daily replenishment will keep the racks fresh.

quot;We set up relationships with rag houses and vintage collectors to keep up,quot; he said, and the company has hired vintage buyers to keep product flowing in. Vintage garments will be sourced domestically and overseas, Alonzo said, and trends will change from month to month, versus season to season. quot;Right now we're into trench coats; next month it could be cocktail dresses and patent shoes,quot; she said. The store will also act as a testing ground for American Apparel, which will sell reworked, printed and modified staples at California Vintage. quot;It could be torn up and patched T-shirts or long dresses that we've made into minis. We think it's a place we can get a little more creative and offer something unique, something we couldn't do with American Apparel,quot; Swenson said.

The store, which will open at 2111 W. Sunset Blvd. in Los Angeles' Echo Park neighborhood, occupies the same storefront used to launch American Apparel's very first retail store in 2003.

However, the average shopper will be hard-pressed to identify California Vintage as an American Apparel store. quot;The vibe, the signage, everything will be different. The only thing that might give us away is the American Apparel clothes that we'll be selling,quot; Alonzo said.

While American Apparel's 166 stores feature modern white sparkling interiors with pops of primary colors, California Vintage will feature floor-to-ceiling black surfaces and a more-boutique aesthetic. quot;It'll be more dramatic, special,quot; Alonzo said.

More California Vintage stores are in the works for 2008.

Acquisition update

The Endeavor Acquisition Corp., the New York–based publicly traded blank-check company set to acquire American Apparel in a deal worth up to $458 million, announced changes to its agreement with American Apparel founder Dov Charney.

A Nov. 9 filing with the Securities and Exchange Commission amends the original acquisition deal, giving Charney an extra 5 million shares of Endeavor stock upon closing for a total of 37,258,065 shares. Charney was also given a pass on the original stipulation that he buy American Apparel co-owner Sang “Sam” Ho Lim’s 50 percent stake in the company for $60 million. Now, Endeavor will buy Lim’s shares for $67.9 million in cash when the deal closes. Charney’s contract, which calls for him to remain with the company for three years, was also amended to include a $750,000 annual salary with a performance bonus worth up to 150 percent of his salary and a long-term performance bonus of up to 300 percent of his salary. This is a significant leap from the original plan, which called for Charney to receive a $1 annual salary. American Apparel employees also got a break. Now, Endeavor will increase the employee stock option and stock plans from 2.71 million shares in the original agreement to 7.71 million shares. In all, these changes to the deal ratcheted the value of the acquisition up nearly $84 million dollars.

According to the SEC filing, the changes in the acquisition deal are credited to American Apparel’s stellar performance in the third quarter of 2007. The company’s revenue for the third quarter reached $106.5 million, up 34 percent over the same quarter in 2006. Retail sales jumped by 43 percent to $55.9 million, with same-store sales for outlets open a minimum of 12 months rising by 27 percent. Wholesale revenues were up 25 percent for the third quarter to $50.6 million, compared with $40.3 million in 2006. Endeavor also reported that American Apparel’s sales for the first three quarters of 2007 have outpaced its 2006 sales over the same period by 31 percent, with retail sales growing 50 percent and wholesale sales increasing by 15 percent. A stockholder meeting to consider the deal is expected to be held on Dec. 12. Endeavor’s stock jumped more than 2 percent on news of the updated deal to $13.40 per share. —Erin Barajas