American Apparel Going Public (Kinda)

I wrote the following post today for FashionInvestor.com, click here to warp over and read it there:

Endeavor Acquisition Corp. (AMEX: EDA), a blank-check company, has revised its offer for American Apparel due to the fact that sales and earnings at AA have increased significantly since the original buyout offer was made. Dov Charney, American Apparel’s quirky founder, has some newfound reasons to smile, as the agreement brings his annual salary from $1 to $750,000, includes a $100 million life insurance policy, more than triples the amount of shares to be given to AA employees, and allows Charney to hold on to his 55% share of the company. Also, the debt ceiling pre-transaction has been raised from $110 million to $150 million, as American Apparel needs the money to finance the company’s huge expansion. Another new inclusion in this deal is that Endeavor will purchase all of the shares owned by the other American Apparel shareholder, Sang Ho Lim, for approximately $67.9 million in cash when the deal closes.

The special meeting of stockholders to consider the transaction is expected to be held Wednesday, December 12, 2007. With the approval of Mr. Charney, the founder and controlling shareholder, this deal is pretty likely to go through, barring any last-minute drug-fueled reconsiderations. Watch out for big moves in Endeavor stock in the next month or two.

Lululemon Gets Squeezed

Here’s a short piece I wrote for FashionInvestor.com about Lululemon Athletica’s major price drop recently:

“One of our favorite stocks (not to mention a strong, growing brand), Lululemon Athletica, has been getting hammered in the stock market of late. Just over a hour into the trading day, it’s down slightly over one percent at 40.85, a nearly 29% drop from its recent high on October 22nd at $58.00.

Why the drop when Lululemon is expanding and growing sales at a lightning-fast pace? A lot of things are weighing on the stock, one of them is profit taking. Those who were able to secure IPO shares at $18 have been selling to cash in on rising shares, some having profited more than 200% in under 3 months. In addition, Lululemon has so much going for it that investors have bid up its shares to a sky-high valuation, and Lulu would need to grow much faster to deserve this kind of price premium.

Long term, we still have bullish sentiment for Lulu, but investors beware, whenever you make a big gain, others will often run for the exits to take profit, and this is something you must factor in your decision making.”

I didn’t go into further detail about valuation: another big reason for Lululemon’s fall is that it’s priced into the sky by almost any measurement. Forward price to sales is roughly 11, whereas other popular apparel stocks like UnderArmor and Crox sport P/S ratios around 3.

Link via FashionInvestor.com.

Venture Spotlight: Picnik

One of the best ways to support your local entrepreneurship community (and venture capital community) is by using their services if they’re useful. One of the most promising Seattle-based ventures is Picnik.

Picnik is an AJAX/Flash in-browser photo editor, and, though it isn’t as powerful as Adobe Photoshop, it’s arguably much simpler and convenient, especially for non-professionals. It’s got a beautiful interface and it integrates with Flickr/Facebook/Picasa/Photobucket/Webshots albums for simplicity. Flickr has actually chosen Picnik to be its sole image editing tool.

The basic tools I tried got the exact result I wanted, and I was able to export into any common image format. Picnik hopes to make money by charging $24.95/year for its Picnik Premium service, which adds more fonts, editing tools, shapes, and effects to the basic tool. Considering that Picnik doesn’t require any software downloads, is easy to use and is well integrated with people’s photo storage partners, Picnik will probably do quite well if they can continue to advance their offering and define themselves as the premier in-browser image editing solution. One of their only competitors to date is Berkeley, California-based FotoFlexer, which also has a great in-browser editing suite and a healthy number of users.

Picnik is self funded to date, but may be open to taking on some money in a venture round at some point, as some journalists have noted.

Burberry Blues

I wrote an article on the demise and resurgence of the resilient British marque over at FashionInvestor.com:

“I’ve been seeing more and more glamorous people sporting the iconic Burberry (LON: BRBY) plaid pattern lately in and about town, and it’s gotten me wondering if Burberry isn’t in the early stages of a full-scale comeback.

Why was I so bearish on Burberry? I saw the fall of the fabled marque in the late nineties; what I witnessed is summed up well by the Wall Street Journal: “Plaid overexposure. In recent years, the company attached its plaid to too many products and its brand image slid, with even British soccer hooligans wearing it. Exacerbating the problem were counterfeit goods.”

During some research on the famed British marque, I found that Burberry is currently taking London Fog parent Iconix Brand Group (NASDAQ: ICON) to court over use of its check pattern used in coats and scarves. Burberry developed the trench coat on a commission from the British War Office in 1914, and first used the famous patented check to line its trench coats in the 1920s. London Fog likewise has been using its own similar check pattern to line trench coats since the 20s, so this puts Burberry in a tight position to explain why they didn’t fight it out in the courtroom, say, 80 years ago. We’ll see how it plays out.

Via Counterfeit Chic”

Check it out at FashionInvestor.com.

Must Have: Ibarra Mexican Hot Chocolate

My uncle Jeff and his wife Kim have introduced me to many a must-have, and this counts as one of the most memorable.

Mexican chocolate is made from dark, bitter chocolate mixed with sugar, cinnamon, and sometimes nuts. Chocolate is frequently purchased in “disks” although it is also available in bars and syrups. Ibarra is what I use, and, though some find it a little too sweet, I like it just fine.

Mexican Hot Chocolate
serves 4

1 quart milk

2 tablets Ibarra Mexican chocolate* (3.3 oz each), broken into small pieces

Heat milk until just about to boil, do not allow to boil over.

Place half of the chocolate in a blender. Pour half of the milk over the chocolate, hold cover down with dishtowel and blend on low speed until well-combined.

Repeat with remaining milk and chocolate.

Serve immediately.

SuperSonics Moving To Oklahoma City

This is just about the stupidest idea I’ve ever heard of: the new owners of the Seattle SuperSonics led by Clay Bennett, an Oklahoma billionaire, are moving the Sonics from Seattle (the 14th largest domestic media market) to Oklahoma City (the 45th largest).

ESPN’s Jim Caple has written a very fine article on the move, and here are some choice quotes:

“Bennett formally announced his intention to move the Sonics to Oklahoma City less than a day after the tip-off to the team’s home opener. ‘Welcome to the 2007-08 season, Sonics fans! And will the owner of a Prius hybrid please move your car — you’re blocking the owner’s U-Haul vans.’”

“How about a little venom for Howard Schulz? Here’s a guy who built a worldwide coffee empire from Seattle and he rewards the city by selling the Sonics to an out-of-town buyer. Thanks a lot. This was pretty much Schulz’s attitude at the time of the sale: “I am committed to finding a local owner who will keep the Sonics in Seatt… — WHAT? $350 MILLION!!! DON’T LET BENNETT OUT OF THE OFFICE WITHOUT HIS SIGNATURE ON THE BOTTOM OF A BINDING CONTRACT!!” Good grief. You own Starbucks! How much money do you need?”

Anyways, it’s a pretty crazy story, click here to read it over at ESPN.