A class action law suit has been filed on behalf of purchasers of American Apparel, Inc. ("American Apparel" or the "Company") (AMEX:APP) stock during the period between December 20, 2006 through August 17, 2010 (the "Class Period").
The complaint charges American Apparel and certain of its officers and directors with violations of the Securities Exchange Act of 1934. American Apparel purports to be a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel.
The complaint alleges that during the Class Period, defendants made false and misleading statements about the Company's hiring practices and the effect of such hiring practices on the Company's financial performance. Specifically, defendants falsely stated that they made "diligent efforts" to comply with employment and labor regulations, and failed to disclose, and made false statements to shareholders regarding, the effect of the Company's illegal hiring practices on its operating costs and margins. Beginning in July 2009, after the Company revealed that it was being investigated by U.S. Immigration and Customs Enforcement regarding its compliance with U.S. immigration law, the true financial condition of the Company began to be revealed. However, defendants assured investors that such investigation would not have a material effect on American Apparel.
Then, on August 17, 2010, the Company issued a press release announcing that the Company expected to report a loss of $5 million to $7 million in the second quarter of 2010 on net sales of $132 million to $143 million. According to the press release, a significant factor in such losses was "lower labor efficiency at the Company's production facilities in the second quarter of 2010 compared to the prior year period. The lower labor efficiency was primarily a result of the hiring of over 1,600 net new manufacturing workers during the second quarter of 2010." By August 18, 2010, as this news was digested by the market, American Apparel's stock price had declined rapidly, from a close of $1.39 per share on August 16, 2010, to a close of just $0.81 per share on August 18, 2010 - a decline of over 41%.
Plaintiff seeks to recover damages on behalf of all purchasers of American Apparel common stock during the Class Period.
