THE AMERICAN APPAREL TURNAROUND: From Sex Slaves, To Slump, To Sales Success (APP)

Dov Charney

Last month American Apparel announced a quarterly net loss of $7.9 million. For most companies, posting a ninth straight quarter of losses wouldn't be cause for celebration. But things are different at American Apparel, the company known to have girls in bikinis wash its roof.

In the past 12 months, American Apparel, led by founder Dov Charney, has undergone a wrenching series of changes to get the all-American clothing house, one of fashion's most prominent advertisers, back on the right track.

American Apparel is known for sexy clothes, sexy ads and lawsuits alleging sexual harassment. But sales are on the increase, its retail footprint is being rationalized, and its wholesale and internet businesses are booming.

If Charney can pull this off—the company is still in the red, so it's not guaranteed—it will be one the most epic turnarounds in fashion retail history.

Here's how American Apparel has gone from rambunctious teenager to mature adult, accompanied by a history of the ads that made the store infamous.

In the beginning ...

American Apparel was started by Dov Charney while he attended Tufts in the late 1980s.

By 1997, the company moved from Charleston, South Carolina, to Los Angeles. In 2000, American Apparel moved into its current Los Angeles factory.

The business originally focused on T-shirts, allegedly inspired by one of Dov's ex-girlfriends.

In 2006, the company was sold for more than $380 million to Endeavor Acquisition Corporation.

Charney stayed on and still runs the company today.

In 2004, concerns about the sexual nature of AA's corporate culture emerged.

Charney gave an infamous interview with Claudine Ko, which became a relatively unedited article looking into the company, Charney and the women around him.

Ko claimed Charney masturbated in front of her — multiple times.

What followed were a series of lawsuits from former employees, now totaling nine, regarding sexual harassment, naked pictures, etc. In one of them, filed in 2011, a woman alleged Charney trapped her in his home as a sex slave.

But in the mid-2000s, sales were booming.

2008 was a very good year, until ...

... Charney called his CFO a "complete loser."

Ken Cieply resigned a few weeks later and the stock had one of its worst months in history. It would get temporary reprieve, but then suffer with the rest of the markets in the fall of that year.

By December there were still reasons to celebrate a bit: rapid expansion, success in the U.K., domestic praise, and a great online strategy

See the rest of the story at Business Insider

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The 3 Mistakes Facebook Investors Are Making

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Why do smart people make stupid (money) mistakes? That's one of the questions I've been asking myself constantly as I witness the episode of mass lunacy that is the Facebook (Nasdaq: FB  ) IPO. Thankfully, behavioral economics provides some answers that standard economics can't. Here are three psychological biases that have manifestly driven numerous investors to buy Facebook shares (or to consider buying them today). Buyer beware!

Mistake 1: familiarity bias ("buy what you know")
Familiarity bias pushes people to favor investing in companies with which they have some degree of, er, familiarity. Here's an egregious example lifted from recent headlines: Chesapeake Energy employees' retirement-fund assets were invested in the company's stock to the tune of 38%.

At the end of March, Facebook had 188 million users in the U.S. and Canada. Given a combined population for both countries of 350 million, that means the odds are better than one-half that you are one of them (in fact, they may be significantly higher since you're reading this on the Web). There are few companies I can think of that have come public in recent memory with that sort of brand awareness and mass user appeal (Google (Nasdaq: GOOG  ) and Visa are the two other best examples I can come up with within the past decade).

Many people use Facebook and they enjoy it; it's no surprise, then, that the level of interest from individual investors for Facebook shares was, by all accounts, unbridled. But blindly following Peter Lynch's recommendation to "buy what you know" isn't a prescription for success. I have to agree with Eric Savitz, when he wrote in Forbes on March 12:

"While Fidelity's Lynch was no slouch in the stock-picking game, I'd advise you to know what you buy instead of buying what you know. What I know is this: There is simply no logic to paying 100 times earnings for Facebook when there are far cheaper bets on the future of the digital economy."

Mistake 2: anchoring ("that number there!")
Anchoring is a form of bias where beliefs rely heavily on one piece of information, perhaps because it was available first, and are not sufficiently adjusted afterward. ("Behavioral Finance: Quo Vadis?," Journal of Applied Finance, Fall/Winter 2008.)

What are Facebook investors anchoring on? I suspect many of the investors who bought the stock in the days following the IPO and many who are now thinking about buying the stock are anchoring on the IPO offer price (or the first day's closing price, which was nearly identical).

The reasoning goes something like this: "It was priced at $38, and I've got the opportunity to buy it at better than a 20% discount relative to that level. Bargain!" And that would be entirely sensible reasoning ... if the people who adopted it had verified that Facebook shares were fairly valued at $38. The trouble is that, far from representing fair value, the IPO offer price flagrantly overvalued the business, to such a degree that a 20% discount hardly puts a dent in it.

On the Sunday that followed the IPO, I wrote that "a prudent speculator would require a wide discount to even the bottom of the IPO's pricing range [$34]." I stand by that statement, and I'll be a bit more specific: By "wide," I mean something along the lines of 50%. Apply that to $34, and you can start looking at the stock when it hits $17. Even at that price, it would remain speculative.

Mistake 3: disposition effect ("it's not a loss if I don't sell")
Congratulations -- you were part of a historic IPO when you bought shares on Facebook's first day of trading! You paid somewhere between $38 and $45 for your shares, and now you're sitting on a substantial unrealized loss, and you just can't bring yourself to eat the loss by selling your shares.

You're not alone. In falling prey to the disposition effect, investors are much less willing to realize losses than gains. Roughly one-third less likely, in fact, if we go by a study by Professor Terrance Odean of University of California, Berkeley, who looked at the trading activity between 1987 and 1993 of 10,000 households with accounts at a large discount brokerage.

A stock's long-term performance starting from any given point in time ? which is what any genuine investor should be concerned with -- is independent of whether the stock is a profitable or losing position in your portfolio. If you own Facebook shares, the only thing that should dictate your decision today to sell, hold, or buy more is an assessment of the shares' likely future performance.

Know thyself
Know yourself before you consider buying Facebook (or any other) shares. If you are looking for exposure to social media, one company has been executing brilliantly on a business model that is far better established than Facebook's. Find out why our senior technology analyst says Forget Facebook -- Here's The Tech IPO You Should Be Buying. This report is entirely free of charge and available for a limited time only, so claim your copy today.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal ? and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate ? and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

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Apple Reveals The Tagline For This Year's Worldwide Developers Conference (AAPL)

Apple has already started setting up for its huge Worldwide Developers Conference that will take place next week.

Some have spotted banners for the event hanging at the Moscone Center in San Francisco where the conference will take place. The banner below, found via MacRumors, reveals Apple's tagline for WWDC 2012: "Where great ideas go on to do great things."

The event is scheduled to begin this coming Monday at 10 a.m. with a keynote and should include some pretty major product releases and updates including a near complete refresh of the Mac line and deeper integration between Facebook and iOS.

Apple WWDC 2012

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Cricket's New iPhone Prepaid Plan: Cheaper, But Is It Worth It?

iphoneIf you've been holding off on buying an iPhone for fear of being trapped into an expensive two-year contract with AT&T (T), Verizon (VZ), or Sprint Nextel (S), you're in luck. Leap Wireless (LEAP) subsidiary Cricket has a new prepaid plan with no strings.

The savings look impressive at first blush. But be warned: You'll sacrifice plenty of what makes the iPhone great in your quest to cut back on your phone bill.

Brrrrring! Savings Calling!

First, the good news. Cricket gives prepaid customers two prepaid options for Apple (AAPL) handsets. An eight-gigabyte iPhone 4 runs $399.99; the more modern 4S runs $499.99 and comes with 16 gigs of storage capacity. Both phones are eligible for the carrier's $55-per-month unlimited text, talk, and data plan.

No service or overage fees apply, which is what makes the deal seem so awesome when doing the initial math. Here's a closer look:

Sources: Cricket Wireless, MSN Money.

Bear in mind that Cricket estimates the average customer pays AT&T, Verizon, and Sprint $2,775 over two years for iPhone service. Dividing by two amounts to the $1,387.50 you see in the table above.

But this may be a lowball figure. Family plans can run $200 or more per month. Sign up for a prepaid plan, bank the fees you might otherwise pay to a carrier, and before long, you could have enough to pay for a sweet family vacation.


This Cricket Can't Leap

There is a reason some users actually might want to pay hundreds more for service. All three of the major carriers have what they call fast 4G networks active and available to iPhone users. In truth, they aren't really 4G as defined by technical standards -- but they are much faster than Cricket's 3G alternative.

Plus, you can expect the divide to widen soon. Verizon and AT&T both have faster 4G LTE networks in place now, but only a smattering of smartphones have taken advantage. And most of those models are based on Google's (GOOG) Android mobile operating system.

All that could change on June 11, when Apple is expected to announce a new handset -- the long-awaited iPhone 5 -- with a built-in radio for communicating with the fastest LTE networks. Think Cricket's 3G network looks slow now? Wait until the new iPhone starts streaming 4G LTE.

P.S.: Your Phone May Suddenly Lock Up

Cricket presumably makes up for this flaw by allowing for unlimited data usage, a ploy that AT&T and Verizon both tried and then pulled upon realizing that game-playing, video-streaming users could consume far more than they expected. Other than Cricket, only Sprint has proven gutsy enough to offer unlimited data to subscribers.

Yet there is a catch. Cricket has what it calls a "fair use" limit at 2.3 gigabytes of data per month, after which the network is permitted to throttle back the speed at which you can send and receive data.

For its part, Cricket is downplaying the chances of throttling occurring. A table at the company's website depicts the various types of activities that consume data, topping at 650 megabytes for one hour of streaming standard definition video.

And that would be fine, except that games and high-definition video are what data consumers spend the most time with. Last year at this time, Nielsen found the average iPhone user was consuming 492 megabytes of data per month, about twice as much as the year prior. Assuming growth has continued apace, the average iPhone user is now consuming a gigabyte or more per month, making Cricket's limits not quite as generous as they seem.


Phone Plan vs. Minicomputer Plan

Therein lies the problem. Apple's iCandy isn't really a phone; it's a data-hungry digital Swiss Army knife. What's the point of having one if using it on a limited network stunts the features that make it so desirable?

Consider Siri. The voice-activated assistant present in the iPhone 4S has prompted owners of the device to double their data usage when compared with those who have the more pedestrian iPhone 4.

Cricket users would still have access to Siri, of course, but data limits would make the app far less useful than it otherwise might be for major carrier subscribers with access to higher-speed, higher-capacity networks.

Cricket's prepaid iPhone plan offers hundreds and perhaps even thousands in savings. Just don't sign up expecting the same experience you'll get from any of the major carriers. You won't get it.

Motley Fool contributor Tim Beyers owned shares of Apple and Google at the time of publication. Check out Tim's portfolio holdings and past columns. The Motley Fool owns shares of Apple and Google. Motley Fool newsletter services have recommended buying shares of Apple and Google, as well as creating a bull call spread position in Apple.




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The Rams New Head Coach Stars In A Music Video As A Cop With An Attitude

It has been quite an off-season for former Tennessee Titans head coach Jeff Fisher. First her was hired to be the new head coach of the St. Louis Rams. And now he is making his acting debut in the new video by Nashville band Goodbye June.

Fisher plays boots-wearing, cigar-smoking, Mustang-driving, cop that appears to not like unsavory types.

All-in-all it was quite an impressive debut. Well, except for the part where he is lip-syncing. Yeah, that was odd.

Here's the video...

 

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What Candidate Romney and Queen Elizabeth II Have in Common

--> Queen Elizabeth vs. Mitt RomneyIn many ways, this year's presidential election may come down to a question of wealth ... and, more specifically, a question of Mitt Romney's wealth, as the GOP candidate's holdings have become the subject of considerable discussion.

Democratic pundits have argued that Romney is a child of privilege, and out of touch with average Americans, while his campaign has pointed to his considerable business success as a demonstration of his economic acumen. Late last week, the political mill acquired some fresh grist when Romney released his public financial disclosure report, as every presidential candidate must.

Romney has been quick to highlight his years with Bain Capital, but he has also been quiet about how much money he actually raked in at the private equity firm. And, while Friday's filing gives a better look at the candidate's finances, it's still unclear how much money he actually has. Romney's campaign has claimed that he is worth between $190 million and $250 million. According to the filing, the true figure could be as high as $255 million.

Indeed, despite the filing, the picture of Romney's finances is still maddeningly opaque, particularly when it comes to his investments. For example, the report notes, his 2011 income from his Bain Capital holdings netted him somewhere between a relatively modest $720,000 and a stunning $6.26 million. Similarly, his holdings in Goldman Sachs (GS) yielded upwards of $1.1 million, but there's no way to know exactly how much money Romney has in the investment house -- nor how handsomely that investment has paid off.

In addition to making it hard to gauge the full value of the House of Romney, the vagueness may obscure a significant part of the candidate's decision-making process. Where Romney puts his money -- and just as importantly, where he doesn't -- could reveal a great deal about his priorities.

While his investments are hard to determine, some aspects of Romney's income are much clearer. For example, royalties from his book No Apology: Believe in America totaled somewhere between $50,001 and $100,000, and -- his campaign announced -- were given to charity. Similarly, his seat on the board of hotel chain Marriott International netted him $260,389.74 in stock. Meanwhile, his speaking fees brought in $189,975 in 2011.

Inherited Wealth

When it comes to analyzing Romney's wealth, getting hold of a figure is just the first problem; the second is putting his holdings into context. In the past, many commentators -- myself included -- have drawn comparisons between Romney's cash and the average U.S. household income or Barack Obama's more modest net worth. Romney makes more in a year than the average household will make in a lifetime, and his assets are more than 30 times those of the president.

On Monday, though, Bloomberg TV analyzed the income and holdings of another famously rich person: Queen Elizabeth II. Initially, it would appear that Romney and the Queen share little in common: He's the scion of a political dynasty that stretches back a measly couple of decades, while she's the scion of a royal line that stretches back for centuries. He's a political candidate, while she's a relic of an earlier form of government. She's an institution, while he's running on a platform based in political change. Then again, like the queen, Romney got his start with the help of a major boost from inherited wealth -- and, like her, his finances are somewhat mysterious.


The vast majority of Elizabeth II's holdings -- roughly $11.2 billion -- are tied up in the Crown Estate, a collection of artifacts and real estate that British sovereigns can use, but can't sell. On the bright side, she essentially lives rent-free -- though while Buckingham Palace is sure to impress the neighbors, it's not like she can trade up. Then again, the queen recently fired the crown jeweler after 160 years of service, suggesting that she may have some leeway in matters of style.

Queen Elizabeth's personal wealth of approximately $461 million is a fair bit more than Romney's, but the two of them occupy a similar space in the wealth hierarchy: Romney lands somewhere between ordinary rich people and stratospherically superwealthy people like Bill Gates and Carlos Slim. Similarly, the Queen lands somewhere between lower-rent royals like Queen Beatrix of the Netherlands and epically wealthy monarchs like the Sultan of Brunei or King Abdullah of Saudi Arabia.

And, like Romney, Queen Elizabeth pays most of her bills out of a comparatively modest yearly income, comprised of a $21 million yearly stipend, investment income, and profits from her estates. By comparison, Romney took in $21.6 million in 2010.

But when it comes to comparing the British monarch and the Massachusetts mogul, Queen Elizabeth II's vast holdings could also serve as a cautionary tale. Romney's inheritance was sufficient to provide him a good education and a healthy head start, but -- as he's often pointed out -- the majority of his fortune was the result of his own efforts. It takes little more than a glance at the collection of dilettantes and tabloid fodder cluttering the Queen's family tree to illustrate the dangers of raising a child who has a firm expectation of vast inherited wealth. If Romney wants to find examples a little closer to home, he might take a peek at the Hilton family, the Kardashian clan, the Gettys and the Grubmans.

As for Romney's five sons, his campaign recently revealed that the candidate has created a trust fund of "roughly $100 million" for them. And, given that he campaigned against the estate tax, it would appear that he wants his boys -- and other wealthy children -- to enjoy the full, personality-corroding effect of their inherited wealth. As he progresses down the campaign trail, it might be a good idea for Romney to occasionally spare a thought to the cautionary tales provided by Prince Charles -- or Kim Kardashian, for that matter.

Bruce Watson is a senior features writer for DailyFinance. You can reach him by e-mail at bruce.watson@teamaol.com, or follow him on Twitter at @bruce1971.


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Source: http://www.dailyfinance.com/2012/06/05/what-candidate-romney-and-queen-elizabeth-ii-have-in-common/

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Wii U GamePad: Will Nintendo's New Touchpad Controller Win Back Gamers?

NintendoAfter a year and change of sluggish sales, Nintendo (NTDOY) hopes its new console -- Wii U -- will win gamers over.

Ahead of this week's E3 conference, Nintendo has unveiled the new tablet-like controller that it hopes will revolutionize the way video games are played.

The Wii U GamePad is a new game controller that features both traditional analog controls and a features-rich touchscreen in the middle.

Nintendo has given gamers two screens to play with before: The portable 3DS and 3DSi feature dual screens.

However, the limitation there is that the distance between the two screens is fixed. The possibilities between a touchscreen that is portable and the larger TV where the games are played are endless. In teasing the possibilities, Nintendo shows a golfing game where the GamePad is on the floor displaying the actual golf ball in a sandy bunker. The moment the gamer swings the traditional Wii motion-based controller, the ball clears out in a sea of dust.

Another example of the GamePad's dual screen utility is its effectiveness in two-player sport games. Since the GamePad screen's actions can differ from what's being displayed on the screen, players can secretly select baseball pitches or call football plays in private.

Wii U Also Wants to Be a TV star

The original Wii didn't win gamers on its spec sheet. Microsoft's (MSFT) Xbox 360 and Sony's (SNE) PS3 packed superior processing power.

The Xbox and PlayStation consoles also performed double duty as home theater appliances. The Xbox plays DVDs, while the PS3 plays both Blu-ray discs and DVDs.

Now Nintendo is hoping to raise the stakes by making its GamePad controller an infrared TV remote. Even if the Wii U isn't turned on, the new GamePad can be fired up to perform as a programmable TV remote control.

Speed Is Everything

Sony and Microsoft are probably at least a year away from updating their Xbox 360 and PS3 platforms, giving Nintendo a head start in the battle for supremacy in the next generation of systems.

Things won't be easy. Hardware and software sales have been struggling through most of the past three years, and it usually takes a few years for a new platform before it builds a large enough audience to move the needle.

However, Nintendo is definitely turning heads this week with where it sees the direction of interactive gaming. Now it's simply a matter of waiting to see what Microsoft and Sony can do to top it.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of Microsoft. Motley Fool newsletter services have recommended buying shares of Microsoft and Nintendo. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft.



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Source: http://www.dailyfinance.com/2012/06/04/wii-u-gamepad-will-nintendos-new-touchpad-controller-win-back/

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