August 15, 2018


American Apparel, the clothing brand built on basics and oversexed advertising, is in the midst of a major overhaul as it adjusts to life without the leadership of its founder, Dov Charney. But as it works to turn things around, sales are slumping, management is in upheaval, workers are unhappy, and the company is facing numerous lawsuits from Charney and his loyalists.

The latest news underlines what a slog it faces. In a press release filed yesterday (July 6) with the SEC, the company provided details of an aggressive cost cutting plan that will require closing stores and further cutting its workforce. (It already laid off 135 workers in September). Its goal is to reduce expenses by about $30 million over the next 18 months. The plan also involves attempting to grow revenue. For what it says is the first time ever, it’s launching a new fall line of clothing.

Those measures, however, may not be enough, and American Apparel knows it. At the end of March, the company had $21 million cash on hand. Looking out 12 months, though, it warned it may need to raise more money. ”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,” the statement said, adding, ”and there can be no guarantee that it will be able to raise such additional capital.”

As grim as that sounds, the company is committed to turning things around after five consecutive years of losses. Paula Schneider, the company’s recently appointed CEO, said, ”Today’s announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability.”

If you ask Dov Charney-which of course journalists can’t since he’s under a restraining order that prevents him from making negative comments about the company to the press-American Apparel’s financial woes suit Standard General just fine. That’s the hedge fund that Charney and American Apparel brought in a year ago to support the company financially (it pumped in $25 million) as the clothing maker reconstituted and investigated the allegations of sexual misconduct against Charney.

Since his firing, Charney has claimed that Standard General orchestrated his ouster, and a former employee and friend of Charney’s filed a lawsuit alleging that Standard General has ”positioned itself to make enormous profits should American Apparel fall into bankruptcy.” Standard General denies all of the allegations, saying it’s got more to lose if American Apparel’s stock price continues its plunge.


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