Over the past month, American Apparel has turned into a media spectacle and real-life soap opera.
Although the retailer ousted founder and CEO Dov Charney from his position, he isn’t going down without a fight. Charney has threatened to take legal action to buy back control of the company. But there are other factors in the mix, too.
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American Apparel has received a notice of default from lender Lion Capital. The notice was based on the fact that in its loan agreement, Lion Capital stated that if Charney left the company, it would be in default.
Needless to say, the Made In America apparel chain has been faced with an onslaught of bad luck. In this week’s Editor Q&A, the Retail TouchPoints team shares their thoughts on the brand:
Debbie Hauss, Editor-in-Chief: It’s a shame to see the downturn of American Apparel – a brand built on the “Made In America” theme. But, while one major scandal can harm a brand, 10+ scandals can bring a brand down. That’s what American Apparel is facing with charges of sexual harassment, the firing of a Cancer patient, hiring based on inappropriate criteria, racism, bad workplace conditions and more. It’s literally giving “American” a bad name. Honestly, even with the public ousting of the CEO I think the brand may be down for the count. The only hope may be a rebirth as an entirely new brand.
Alicia Fiorletta, Senior Editor: Ever since my college years, I have been fascinated by the American Apparel brand. The companies American roots, the constant scandals and overall marketing principles excited my inner media critic. But Dov Charney’s constant involvement in employee and sexual harassment scandals has always left a bad taste in my mouth. When he left, I was hoping that he would do so quietly. That he would apologize, move on, and if he was lucky, be asked to come back to the company in some shape or form. But I just read that he was spotted at an American Apparel store in NYC, going against his suspension terms. It seems as though he can’t let go; and as the founder of the company, who can blame him? But at this point, he’s doing more harm than good.
Kim Zimmermann, Managing Editor: The brand needs to clearly state a new direction and highlight the new leadership. When the Wall Street Journal runs a story, “With Dov Charney Out, American Apparel Investors Ask: Who Are The New Guys?,” it doesn’t bode well. The “new guys” are Standard General, a small hedge fund that has also taken on the task of trying to turn around another troubled retailer, RadioShack, and several casinos. They may have bitten off more than they can chew. According to the WSJ, Charney could return to the company if no wrongdoing is found in an ongoing investigation into his conduct. That would probably be the worst of all possible outcomes.
Glenn Taylor, Associate Editor: In February, the NYSE Amex threatened to delist the American Apparel stock, showing that the company has plenty of sustainability issues to go along with the circus at the top. Since the company stock peaked in December 2007 at $15.02 per share, they have plummeted to under a dollar ($.89 as of July 8) and have seen their ambitious business model turn out to be unprofitable. If anything, I would expect a downsized product line or a direct shift in consumer focus, in addition to cutting the nonsense (i.e. managers) out of the company culture enabling all these lawsuits to occur in the first place. At this point, a name change might even help.
Brian Anderson, Associate Editor: American Apparel dug itself a very deep hole with all of these scandals. The brand has been scrutinized to the point where even the dismissal of CEO Dov Charney is a small success compared to the other mountains of bad press it needs to climb over. A total re-branding is the only possible solution that I see can make (somewhat) of a positive impact, in my opinion. Giving the company a clean slate where they can restructure every aspect that has failed them in the past will definitely turn the company around, but will require a lot of hard work and finances.
