American Apparel Acquires Prestigious Boutique Oak

Los Angeles–headquartered vertical retailer American Apparel Inc. will acquire prestigious New York boutique retailer Oak, according to media reports.

The marriage of two very different businesses—Oak serves an influential fashion crowd, and American Apparel looks for wide appeal with its fashion-forward basics—both perplexed and brought cheers from the fashion world and social media.

A statement on Oak’s Twitter page, @OAKNYC, noted that consumers of the two-location retailer were concerned about the direction of the company. “We’re completely committed to maintaining our brand’s vision and are excited for what the future holds,” a statement noted. Oak is a multi-brand retailer for men and women, and it sells its own brand of fashion called Oak.

American Apparel’s stock dipped slightly, 2 cents per share, to $1.99 at the end of day on Aug. 1, the day news broke of the Oak sale.

The news was a surprise to many. American Apparel has been saddled with a heavy debt, which has put it in the red since 2009. However, the company is reporting good financial news. Same-store sales for June 2013 showed an increase of 7 percent compared with the same time in the previous year. Dov Charney, chairman and chief executive officer of American Apparel, said June was American Apparel’s 25th straight month of positive same-store growth. The company made $55.9 million in net sales in June.

Terms of American Apparel’s deal with Oak were not disclosed, but Charney said that the sum paid was not big enough to warrant reporting to the Securities and Exchange Commission.

Oak’s co-founders Louis Terline and Jeff Madalena will reportedly continue to helm Oak and consult American Apparel. American Apparel could help Oak with retail technology, such as RFID, of which the basics company has been one of the most enthusiastic adopters.

American Apparel’s stock dip was most likely an independent event from the news of the Oak acquisition, said Dave King, CFA, a senior research analyst for Roth Capital Partners in Newport Beach, Calif.

King said the deal might lead to increased business for American Apparel. It might have an opportunity to manufacture the Oak brand at its sprawling factory in downtown Los Angeles, he said. The basics company also could build more Oak stores.

“American Apparel’s theme has been going after this older, urban hipster,” King said. “This New York boutique fits the bill for them.”