August 15, 2018


The American Apparel headquarters store in Los Angeles. The retailer set out a plan to advise the new chief executive and to aim toward $1 billion in annual sales. CreditKendrick Brinson for The New York Times

American Apparel said on Monday that it had averted a proxy fight with an ally of its estranged founder and former chief executive, Dov Charney, as the retailer unveiled a turnaround plan meant to get it back on a growth track toward $1 billion in annual sales.

Jeffrey Kolb, a shareholder who formerly worked for Mr. Charney and who had planned to nominate two candidates to the company’s board, agreed to withdraw those nominations, American Apparel said on Monday in a filing with the Securities and Exchange Commission.

One of those candidates, the Lucky Brand co-founder Gene Montesano, will instead be asked to lead a committee that will advise American Apparel’s chief executive, Paula Schneider, who took the helm in January. American Apparel, which is based in Los Angeles, also agreed to name a new independent director to its board before its annual shareholders’ meeting in 2016, the filing said.

Mr. Kolb and Mr. Montesano did not respond to requests for comment.

The tussle over the makeup of the company’s board has been another distraction for American Apparel as it has tried to focus on turning around a company that has lost money for the last four years. The company has also been embroiled in a legal battle with Mr. Charney.

The American Apparel board fired Mr. Charney as chief executive last June, after an initial investigation and accusations that he had misused company funds and had allowed an employee to post naked photographs of a former company worker. Though Mr. Charney denied all the accusations, the board removed him from the company in any capacity in December after further review. The retailer disclosed in March that the S.E.C. had opened an inquiry into the circumstances surrounding Mr. Charney’s departure.

Last week, American Apparel was granted an order temporarily restraining Mr. Charney from seeking removal of the company’s board members, or making negative statements in the news media about the company or its employees, as laid out in a ”standstill agreement” signed last year.

Mr. Charney then filed a lawsuit against American Apparel asking for fees he said he incurred defending himself against the company.

American Apparel workers represented by the same company that counsels Mr. Charney have also filed complaints with the National Labor Relations Board, accusing the retailer of preventing its workers from speaking with the news media and intimidating employees against organizing unions. The N.L.R.B. rejected six labor complaints last month.

Mr. Charney’s lawyer, Keith Fink of Fink & Steinberg, did not immediately respond to a request for comment.

Much of the company’s new turnaround plan, filed with the Securities and Exchange Commission on Monday, focuses on extricating Mr. Charney’s influence from the company and on bringing order to a company that, by its own admission, has been mismanaged to the point of chaos.

The plan points to a ”stagnant retail product,” ”non-existent demand planning” and other problems left from Mr. Charney’s tenure, and his exit. American Apparel’s new branding will do away with ”nudity and blatant sexual innuendo” and ”inappropriate sexual poses” that are ”offensive to many,” the plan says.

The retailer will improve product assortment – going from just 15 new pieces for the spring season to 150 new styles for the fall – and get new designs into stores more quickly. And the company promises a ”major cultural shift within the organization” with a ”focus on accountability, collaboration, transparency, efficiency and communication.”

American Apparel will aim for annual sales of $700 million to $750 million, eventually increasing that goal to $1 billion, according to the plan.

In merchandising, American Apparel is struggling with millions of items of excess inventory, produced and accumulated with little planning or forecasting of tastes, styles or even seasons. The retailer has been trying to sell off, at a discount, more than a year’s supply of belts, watches and sunglasses, Ms. Schneider said.

Still, that is a problem that Ms. Schneider said she would be able to tackle. American Apparel is cycling out that inventory and filling its floor space with new styles, she said. In an interview, Ms. Schneider said she did not have full control over the outcome of the company’s legal quagmire. ”But I have control over the inventory, our products,” she said. ”That’s what I’m going to focus on.”

Correction: June 10, 2015
An article on Tuesday about the avoidance of a proxy fight at the retailer American Apparel misstated, in some copies, the timing of one concession the company made to a shareholder who, in return, agreed to withdraw the nominations of two new directors. American Apparel agreed to name a new independent director before its 2016 shareholders meeting, not before the meeting next month.


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