American Apparel Case Study of 2011

The clothing company American Apparel began its decline in 2008 and has only begun to sink in deeper into debt since then. Their largest current liability lies under the account “Current Port. Of LT Debt/Capital Leases” where it shows that a debt of $369,300 from 2008 rose into $1,394,000 in 2010. Some of the reasons that are the cause this great financial debt and American Apparel’s overall growing state of bankruptcy could be:  the rise in cotton prices for the making of their cotton clothing, their mid-priced basics that may be overpriced to some due to the long recession, and not to mention the fact that fashion itself isn’t such a big thing when you’re short of cash from recession. American Apparel also expanded their stores to over 100 in the last few years, nearing 280 stores in total, so perhaps having expanded too greatly in such short years also added to their struggle with cash and income. CEO Dov Charney himself blames the American government for removing over 1,500 of his employees for not having proper immigration documents, especially when those employees haven’t even left United States after being forced to quit American Apparel.

I think that the $14 million would be best put to use in appealing to customers, especially because of all the sexual scandals surrounding Dov Charney, right now American Appeal really needs to do better with the media than its CEO. Better ads than near-nudes like continually promoting the fact that all the clothing they make are made in America and not by sweat-shop labourers will always be a nice incentive for those who are looking at American Appeal’s current type of suggestive picture-ads and shaking their heads. That is but one of the possibilities of use the $14 million could be put to in commercializing to the public. 

Lululemon Inventory Crisis: Good or Bad?

Article: http://business.financialpost.com/2011/03/17/lululemon-drops-on-cost-inventory-pressures/
Lululemon's Cash Flow Statement: http://ca.hotstocked.com/companies/l/lululemon-athletica-inc-LLL-cash-flow-888.html

Summary:
The retailer company known as Lululemon sells yoga and running-wear materials. For their fourth period that has yet to end, Lululemon discovers that they are short of inventory due to an incredible jump in sales. This period has exceeded analyst expectations. Their profit for this quarter has doubled to a $55million and gone up 53% in revenue to the value of $245.4million. Due to such great demands, Lululemon has paid more for goods to be flown in. The cause of this sudden increase in sales may be because of our economy’s post-recession recovery where many people are finding themselves a little extra money to spend. Part of flying in the new goods also partook in negotiating agreements with multiple factories in Asia to uphold the sale needs. Undoubtedly, such profits will bring up the values of Lululemon’s shares in the stock market. To further expand their company, Lululemon is also planning on opening six new North American stores for this quarter. Lululemon is working to be more internationally known, such as becoming more aware online. So far, its’ online division has reeled a good 10% of their overall revenue. The company plans on creating options for country-specific selections and improving shipping internationally. Currently, Lululemon has a total of 137 stores already open in North America and Australia.

Connection:
The first connection is found in Lululemon’s quarterly cash flow statement of January 2011, under operating activities. In their CFS, they have a “Decrease in Inventories” account of $7,956,000. A decrease in inventory means an increase in cash flow because Lululemon has sold the items in exchange for cash. Lululemon’s end cash for the January quarter is $316,365 and will most likely rise to a larger sum for the end of this current quarter. However, that value will be unknown until the quarter ends.
My second connection pertains to the six new North American stores that Lululemon plans on opening this quarter. I do not have numbers to provide because the quarter has not yet ended, but once it has, Lululemon’s CFS for the account “Purchase of Property, Plant, Equipment” under investing activities will increase compared to the previous quarter ended. It is an increase because the stores count as property bought, and will result in a decrease of cash flow because cash has to be exchanged for these properties.

Reflection:

I think that Lululemon will be successful in Canada as long as the economy does not fall drastically. However, for United States and Australia, I am unsure because I do not live or shop in either countries. On the other hand, from blogging on this article, I would not be surprised to hear more about Lululemon in the future as the company continues to grow. With such demanding sales, there should be no problem in making sure their company is heard and known international-wide. They have nice numbers in profit and revenue each quarter, growing stock price values, as well as investing with the right idea: expansion for Lululemon. Perhaps I will considering checking their clothing brand the next time I go shopping due to their popularity.

Will Apple's Outstanding Income Be Shaken By The Absence of Job?

Links:
http://www.financialpost.com/related/topics/Apple+without+Jobs/4123266/story.html
http://www.financialpost.com/related/topics/Jobs+health+overshadows+Apple+earnings+today/4124760/story.html
http://www.financialpost.com/news/technology/Apples+earnings+outshine+Jobs+absence/4128629/story.html

Apple's Financial Statement:
http://www.apple.com/investor/

Summary:
On January 17th, Apple's Chief Executive's leave of absence was made known to the world. Steve Job requested to take time off of his work due to medical health concerns, and in that, another concern has risen. Steve Job is [to some people] Apple itself. He does more than his part for this popular company and often takes part in all aspects of creation in its products. Because of this, will the shares for Apple drop like it did the last time he took a leave of absence? Worse yet, Job has not provided any information or date on his return to the beloved company. All of that may have a huge effect on Apple's future, but so far, they have been doing extremely well. Mr.Cook, who will be stepping in for Job, has proved to be a reliable pair of hands for all the other times Job has taken a leave of absence. For the company itself, Apple has done gloriously with reaping in the money and shareholders should be pleased. Apple brought in an astounding sum of US$26.74-billion in the quarterly ending of Dec.25, 2010 which is a jump of 71% from exactly a year ago of US$15.68-billion. It sold 16.24 million iPhones despite being in short supply as well as 4.13 million Macs because of a high demand for Apple's lovely thin Macbook Air computers. iPod Touch has also accounted for more than 50% of the all the iPod sales. Apple's success in the technology-filled world has been noted globally with the iPhone, Mac computers, and having created the tablet computing market itself with the introduction of the iPad. Hopefully the jump of 4% in shares bought after Apple announced it's earnings will continue to increase rather than decrease with the absence of Steve Job.

Connection:
The first connection I made from Chapter 3 to this article is the earnings per share. The earnings per share is the amount of income earned in relation to the number of common shares held by the owners. To calculate the earnings per share, divide the income by the number of common shares outstanding, in a period. An example can be found in Apple's financial statement for the three months ended of December 25, 2010. Their net income of $6,004 (in millions) was divided by their weighted-average shares outstanding of 919,294 (in mils) producing the basic earnings per share of $6,531.
The second connection regards the gross margin which is "sales or service revenues" subtracted by the "cost of goods or services sold". In Apple's financial statement for the three months ended of December 25, 2010, their accounts are name differently, "net sales" and "cost of sales", but still produces a gross margin. Apple has $26,741 (in mils) from net sales, $16,433 (in mils) from cost of sales, and a gross margin of $10,298 (in mils) for the three months ended of December 25, 2010.

Reflection:
Looking from the consumer's point of view, I would not let the absence of Steve Job defer me from buying Apple's latest products until his (unknown) return, for a safer or better products guarantee. As a shareholder investor, I would also not let Job's leave keep me from buying stocks in Apple. My reasons for this is because it has not been the first that that Job has taken long periods of time off work. The company still fared well during those times despite some drops in stocks. On top of that, Apple has been showing very satisfying results since the release of it's popular iPad. The iPad is not only new to North America, but to the whole world. I am sure that there will be plenty more versions in the future, each better than the previous. Therefore, the iPad itself will be in popular demand for a long while, guaranteeing the future for a steady net income. If investors share the same thoughts, then hopefully stock prices will also continue to be steady in the near-future.