In this excellent article, Aaron Taube describes the secrets of American Apparel's ($APP) red-hot Instagram account. I would like to add my own comments to Taube's article.
Since I have been following the company, $APP has always promoted photography heavily on its site. When you lend on americanapparel.net the first thing you see is a slideshow of different images not all related to the promotion of clothing. The company has invested its own efforts to make its photographic endeavor part of its strategy. The amateurish look of the pictures promotes authenticity of the brand and allows any employee to contribute to the effort. Dov Charney, has himself led some of these photo shoots but most of $APP Instagram pictures come from employees working at different retail locations throughout the world. Most companies will not allow this to happen. They prefer having professional shots with management curing the content for branding identity.
American Apparel does not have these constraints and it makes the brand appear less corporate and more authentic, which is paramount to gaining trust in a social media centric society. In addition, employees, working at the retail level, are closer to the customers and are in a better position to seize the magic when it happens. As shopping becomes more visual, American Apparel, the photographer, will benefit.
$APP's activities on Instagram won't move the needle much in the near term but it supports our thesis that Dov Charney is obsessed about building a highly differentiated apparel company. This is one more piece to the puzzle that confirms that he may be closer to his objective than most people think. In addition, when you account for all the highly differentiated initiatives the company is pursuing, it becomes more obvious that the company is an asset that is grossly undervalued.
American Apparel is an asset you can't build for the value of its market capitalization.
Written by Michael Bigger
Disclaimer: Bigger Capital, LLC, Bigger Capital Fund, LP, Bachelier, LLC and the Bigger family own more than 3.27 million shares of American Apparel. American Apparel is a highly distressed situation and it is not suitable for the majority of investors. The likely outcome of an investment is a loss of principal. In other words, the probability of losing all your investment in this situation is very high. We have been purchasing American Apparel since May of 2011 and we have nothing to show for it. Take our opinions with a grain of salt and do your homework. None of the Bigger entities individually or in aggregate have an obligation to file its position with the SEC at the time this article was published.