American Apparel has been around since the early 90’s when the product line was nothing more than basic T-shirts. Montreal-born founder, Dov Charney grew the company from a primarily wholesale brand to a staple retailer with over 260 stores. In 2008, Charney was named Retailer of the Year at the Michael Awards, a huge honour in the fashion industry. He was also named Man of the Year by both the Fashion Industry Guild and Apparel Magazine. The Guardian named American Apparel “Label of the Year” in 2008.
But it seems like the good times are in the past for Charney and American Apparel. Charney was fired as CEO of the company in late 2014 due to his misuse of company funds and sexual harassment allegations. He was given the choice between quietly resigning as CEO and staying with the company as a consultant, or being fired and having the reasons why made public. He chose the latter.
With Charney as CEO, American Apparel, a publicly traded company since 2006, wasn’t exactly thriving. They’ve reported a loss of $300 million since 2010, and their stock is currently trading at less than a dollar. But getting rid of Charney was supposed to be a step in the right direction.
This week, newly appointed CEO, Paula Schneider, announced that in order for American Apparel to move forward and gain back some of the ground they’ve lost, they have to make the tough decision to close some stores and lay off employees. Their goal is to save $30 million in 18 months this way, and they also plan on revamping their product line.
The plan for their first ever fall line includes “advanced basics” and what American Apparel is calling “key items in both men’s and women’s”. Pretty vague. But they have always been known for the basics, and they want to stick to what they’re good at while also giving shoppers something new to look forward to. Despite the solid plan in place, Schneider is still cautious about being too optimistic about the future of the company.
“Even if American Apparel increases revenue and cuts costs, there can be no guarantee that the company will have sufficient financing commitments to meet funding requirements for the next twelve months without raising additional capital, and there can be no guarantee that is will be able to raise such additional capital,” she said in a statement.
One of the reasons the financial future of the company is in question is the approximately 20 lawsuits that have been filed by former employees and Dov Charney himself. In his lawsuit, Charney claims the company’s investigation of his conduct was part of some kind of “secret conspiracy” to remove him as CEO and his dismissal was a breach of his employment contract. He’s also suing Standard General (the hedge fund in control of the company since his departure) for defamation of character. American Apparel has countersued Charney, accusing him of a “scorched earth campaign” as he tries to regain control of the company.
Needless to say, it’s a bit of a mess. Although Charney is the one who built American Apparel into the company it is complete with sometimes overly sexualized ad campaigns, and devotion to paying manufacturing employees fair wages, it’s pretty clear that he wasn’t doing the company any favours by sticking around. Now he seems determined to completely destroy everything he created with lawsuit after lawsuit.
If the new CEO can manage to distance the company from Charney’s mistakes, and increase revenue, while preserving everything that’s good about the brand it would probably be a miracle. But if they can get shoppers interested in a new line, maybe they’ll have a chance. After all, these days, success is all about the ability to adjust to the constantly changing market, and knowing how to spend the money you do have wisely. If nothing else, with a female CEO, maybe we’ll see a change in their ad campaign strategy. And that could only be a good thing.
