'Cautious expansion' for American Apparel in Britain

It faced a bleak future, but the US fashion retailer has bucked the trend after restructuring

American Apparel, the US clothing retailer known for its controversial advertisements and founder, is bucking the trend in the UK and has reported positive sales growth despite the shrinking UK consumer's purse.

The listed US retailer reported a 3 per cent increase in like-for-like sales for the third quarter this year, and said sales in the UK and Europe "indicated a strong performance".

The company faced a bleak future earlier this year but has now restructured and has $20m from new investors to continue its turnaround.

Dov Charney, the notorious Canadian founder and chief executive of the LA-based company, has caused controversy for his overtly sexual behaviour and comments, and is even facing accusations of sexual harassment by former employees.

In April, the firm faced a debt crisis amid falling sales and was close to collapse, but was rescued by a $14.9m injection of capital from private investors led by the Canadian financier Michael Serruya and private equity investor Delavaco Capital. Mr Charney owns just under half the shares in the company.

John Luttrell, chief financial officer, said 2011 was much better. "We love the UK and the UK loves us."

Last week, the retailer posted results at Companies House for the UK for 2010 showing sales at just £7.3m, down from £10.5m the previous year and a profit of just £10,236.

But Mr Luttrell said that, despite the "modest decreases" in 2010, this decline had reversed in 2011 in the UK and sales were now positive. He said the UK still offered an opportunity to grow and that the business had stabilised.

American Apparel has 15 stores in the UK and says it is looking for new ones to "cautiously expand". It has 247 stores in 20 countries and is also focusing on expansion in China and Hong Kong.

The company stressed that its better than expected growth was across stores, its wholesale and online business. Overall, wholesale net sales increased by 10 per cent while total net sales increased by 5 per cent to $141m – up from $134m for the same period last year.

American Apparel's sales growth has bucked the general trend in the UK where just last week Mothercare and the young fashion retailer SuperGroup – owner of Superdry – issued profit warnings that highlighted the tough consumer climate.

Tesco posted its worst UK sales performance for more than two decades last week, while the consumer goods group Premier Foods issued a profit warning on Friday, sending shares down more than 30 per cent.

Premier, owner of brands including Mr Kipling and Hovis, is valued at £150m but has debt at almost six times this level, at more than £850m.

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