Culture

American Apparel is on the verge of collapse

Over the last decade we may have seen the rise and ultimate fall of the “American Apparel” brand. The demise of the once-great retailer began with sexual harassment scandals and terribly publicity stemming from the now dismissed CEO, Don Charney. Following that disgrace the brand began spiraling out of control, ending quarter after quarter with dismal sales figures.

Now it seems American Apparel is going all-in with a new “Strategic Turnaround Plan,” outlined by the company earlier today in a press-release following an investor call.

With “Redesigned fall merchandise line” and $30 million in “cost-cutting initiatives,” the outlook still doesn’t look good for the retailer, which will be closing stores across the country in an effort to drive sales and cut costs.

The press-release read. “For the first time in the Company’s history, later this year, American Apparel will unveil a new fall line focused on advanced basics and key items in both men’s and women’s.”

“Historically, the fall season has not been a major focus for the Company. We are beginning the process of re-merchandising the product assortment in our retail stores to increase productivity by SKU,” said Paula Schneider, recently appointed Chief Executive Officer of American Apparel. “The new styles are designed to increase revenue as we continue to evolve our product offering during this important selling season,” added Ms. Schneider.

The new initiatives that are being put in place are expected to save the company $30 million over the next 18 months. These include, “closing underperforming retail locations” and a plan to “streamline its workforce to reflect a smaller store footprint and general industry conditions.”

As we mentioned before, the company was rocked by scandles and the new CEO stated that management, “is defending the Company against approximately 20 lawsuits and administrative actions initiated by Company founder Dov Charney and his associates.”

“The Company believes these cases are meritless and intends to vigorously defend such actions and, where possible, pursue remedies against Mr. Charney for his actions,” the statement read.

That’s even the darkest forecast for the retailer. The company also confirmed that, “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 it will be able to raise such additional capital.”

“We are committed to turning this company around. 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. Our primary focus is on improving the processes and product mix that have led to steep losses over the past five years,” said Schneider. “Our customers, employees, and local communities around the world believe that American Apparel is an iconic brand that deserves to succeed. My job is to make that a reality.”

Schneider stated, “We are looking forward to working with Christine and Brad to leverage their expertise, which will be invaluable in delivering compelling products to our customers. We are proud of our heritage as the largest apparel manufacturer in North America, and the initiatives announced today are designed to enable us to return to profitability so that we can continue to serve our loyal customers and provide fair wages to our dedicated employees for years to come.”