Today American Apparel got thrummed in the hoo-ha because, for the third time in recent memory, they warned that they might have to file for bankruptcy protection.  Also, their numbers looked bad, again.

Am I the only one not buying this story?  True, they do have only a seven figure stash of cash on hand, and appear to be losing money at a rate much greater than that, but the actual debt that is supposed to bring about their downfall (about $150M worth) cannot possibly be generating anywhere near enough interest expenses to put them under.

Speaking of debt, some of it that was owed to chief exec, playboy extraordinaire, and my hero <3 Dov Charney, has been recently forgiven in exchange for some APP shares.  In addition, Dov put some cash into the company for even more APP shares as recently as a couple weeks ago.  Why is the main man so bullish on his stock while reporting doom and gloom?

Explanation #1: It's a desperate attempt to prop up the company with his own capital, destined to fail.  Ok, I can buy this, maybe, but why do it right before reporting?

Explanation #2: They are a horribly mismanaged company that is being run into the ground.  This is what the sellers of APP want you to think.  Maybe true, maybe not.

Explanation #3: They willingly stretched their budget too far, because they want to go bankrupt, maybe because the eccentric man with the master plan (and a million dollars in his hand) wants to stick it to his creditors and the tax man.  But again, it doesn't make sense to stock up on equity just prior to this, and since the creditors have been capitulating in recent months, I find this explanation hard to believe.

Or, it could be an orchestrated drama -- knowingly or not -- in which the company is resurrected from imminent oblivion through a sudden epiphany of governance and prudence.  Hahahahaha April Fools!  Right?  I'm sure many of you reading this think that's about as likely as ol' Dov getting a sex change and becoming a nun.

But look at the financials.  Here is a company that has nearly a half million followers on facebook, is still pretty popular, and brings in over a half billion in revenue.  Even with their puzzling -3% operating margin, they should be able to cover interest and other expenses.  That is, IF they didn't spend so damn much on SG&A, I can only assume aka "Advertising".  Comparing them to URBN, for example, who rakes in four times as much dough, but only spends about two times as much on selling, I think the case can be made that APP does not have to go bankrupt, the only question is do they want to go bankrupt?  By contrast, NKE brings in about 10 times as much as URBN, yet their SG&A is a commensurate 10-15x URBN's.

So, friends and disciples of Dov, if you believe in the future for APP then follow the man's lead and buy up some shares while the blood is in the streets.