Revenue Up, Profits Down At American Apparel

American Apparel generated $545.1 million during 2008, well up from the $387 million it recorded in 2007. But its net income dipped from $15.5 million a year ago to $14.1 million. The year ended Dec. 31.

The decline in profit was primarily due to $12.1 million in shares given to manufacturing employees in August, and $1.1 million in payroll taxes related to the shares.

Separately, the company had added manufacturing employees throughout the year, raising costs and diminishing productivity until these employees could be brought up to speed. The company calculates that their productivity reaches expected levels within three to four months after hire.

In 2008, online retail operations accounted for 7.2% of the company’s business, a tick up from the 6.3% they pulled in during 2007.

The Analyst’s Take: American Apparel primarily breaks its operations out by market (U.S. Wholesale, which includes domestic online purchases); U.S. Retail; Canadian; International. But online sales within these categories are nestled in the company’s Securities and Exchange Commission forms. How did online – its primary direct marketing arm – sales do? Within the U.S. wholesale market, the slipped as a percentage of overall sales, from 16.3% in 2007 to 15.1%. In Canada, the percentage more or less stayed the same, pulling in 2.5% of Canadian revenue, up from 2.4% to 2.5%. Internationally, the channel saw its biggest jump, from 7.8% to 8.3%. Why the declines in the U.S. and Canadian markets? Probably due to 78 net new stores during the year, which diluted online’s earnings when compared to total store revenue. Online revenue is nice and steady for this chain: Wonder how this arm’s operating profits are?