With founder Dov Charney out of the picture, American Apparel looks ahead

American Apparel executives and board members regained a stride of control now: A personal bankruptcy court judge approved their plan to move forward with a reorganization strategy that transfers ownership of the company from shareholders to lenders, and in doing so, strips founder Dov Charney of any stake from the company.

Charney continues to be aggressively fighting to return to American Apparel since he was ousted as its chief executive amid allegations of sexual misconduct and misuse of company money, and also the court’s move deals a significant and perhaps final blow to his efforts. Plus, it restructures a crushing debt burden that was making it a hardship on the clothing chain to do business.

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“This is as much of a clean slate as they’re going to get,” said Liz Dunn, leader at retail consultancy Talmage Advisors.

So now what?

The struggle with Charney has no doubt been a distraction for American Apparel, but it is hardly the retailer’s only problem. Sales have been in a tailspin, dropping some 17 per cent in the last quarter where the company reported earnings. (It has not reported sales since your bankruptcy filing in October, however the company says christmas was “tough.”)

Paula Schneider, the executive who replaced Charney at the top of American Apparel, has stated the retailer’s weak sales are a characteristic of more routine retailing missteps: The merchandise has missed the objective with customers, and stores weren’t put into the best locations and frequently were crowded with too much merchandise.

And now, Schneider hopes that American Apparel – a destination for wardrobe basics and youthful, edgy pieces such as bodysuits and crop tops – is able to proceed with a brand new concentrate on the strategy she outlined months ago to turn things around.

“It seems like a little bit of a rebirth, to be able to maintain the first inning,” Schneider said within an interview Wednesday.




When you are looking at the garments, Schneider said the company could buy only about 10 % from the new designs it cooked up for last fall, and those designs composed no more than Six to eight percent of the items was at stores. Which should change after the reorganization, so for that spring season, she expects to create a lot more new items to stores, likely 125 to 130 new pieces.

For spring, she said American Apparel will concentrate on selling a brand new women’s “Best Fav” T-shirt, a wardrobe staple that it hopes brings back customers who’ve fed up with T-shirt designs that Schneider says feel outdated. So how exactly does Schneider know the existing women’s T-shirts aren’t striking the mark?

Even in American Apparel corporate offices, she said, “I don’t ever see anyone putting it on.”

Still, it might not be quick or simple for American Apparel to create these kind of design updates, especially since clients are trying to widen its appeal beyond teens and also the college set to ladies within their 20s and early 30s.

“It’s likely to have a very savvy, creative merchant and planning team to recognize ways to evolve the American Apparel product” for somebody who dresses for that office after which really wants to go out for that evening, said Ann Paulins, who teaches retail merchandising and fashion product at Ohio University.

This isn’t a busted brand. It’s a busted company

Beyond clothes, Schneider has gone to live in close underperforming stores, trimming the chain’s portfolio from 240 locations to 204 as part of a broader cost-cutting initiative it announced last summer. Since the closures are complete, she said the program is to make the remaining stores simpler to shop. For that stores that remain, the company is piloting new merchandising tactics at its Ny outposts. In SoHo, for example, they has taken 40 per cent of the fixtures off the store floor and axed slow-selling pieces. Schneider asserted it seems to be fueling a favourable sales trend in that location and it is helping customers more easily determine what they’re searching for.

Schneider arrived at American Apparel after it had lost a lot more than $300 million over five years under Charney. But investors continued to market from the stock after her arrival, driving it down to just pennies a share prior to being delisted in October. That may suggest they weren’t confident concerning the changes she’s outlined.

Some employees, too, have staged protests outside American Apparel’s offices to register dissatisfaction underneath the new leadership.

Analysts said certainly one of American Apparel’s strongest assets in the revival could be that it is clothes are made in the United States. If leveraged right, that may resonate in a moment when shoppers are wanting to know where their items originate from.

“Authenticity really matters towards the millennials a lot,” said Kirthi Kalyanam, a professor at Santa Clara University who researches retail.

Craig Johnson, president of Customer Growth Partners, a retail research firm, said his firm routinely surveys mall shoppers, and he finds that the American Apparel brand continues to have lots of cachet with customers.

“This isn’t a busted brand,” Johnson said. “It’s a busted company.”