American Apparel going out of business?

Via on Mar 31, 2010

American Apparel going down on U.S.?

american apparel ad dov legalize gay american apparel rights equality marriage tee shirt

L: founder Dov Charney in a detail of a typically controversial early years post-coital ad featuring…himself and a “friend.” R: AA has consistently taken risks, both good and occasionally iffy.

Since selling to The Man, everyone’s favorite innovative hipster company has traveled a rocky financial road.

Frequent updates via Gawker, which seems to have it out for AA.

American Apparel has long been one of ele’s favorite companies.

Why?

They’ve proven to the business world that one can be hugely profitable while being Made in the USA (unlike most of our other favorite companies), offering great cuts and classic styles in sometimes-organic cotton, offering free ESL classes to their fair-wage-paid workers, running their downtown LA factory in a green manner, offering some non-toxic, affordable options, promoting gay equality (which too few companies do so publicly), featuring un-made up models, and running their stores in an out-of-the-box manner.

american apparel immigration

And, of course, they’ve been one of America’s most controversial companies given founder Dov Charney’s unashamed exposure of his bits and tackle, the occasional sexual harrasment suits, his hiring of thousands of illegal immigrants, and most infamously perhaps this advertising, which consistently walks the line between softcore porn and edgy, lecherous smut that portrays young women as sexual objects.

dov charney

But recently, Dov’s business success story has gotten complicated. Profits are up, but strange loans are afoot. Sales are down, as is supply and cash on hand.

Via Inside Retailing:

American Apparel has been hit especially hard by the GFC, with store sales dropping by around seven per cent in its fourth quarter.

And sales are expected to drop even further in the first quarter of the company’s new financial year, with an additional 10 per cent fall predicted.

The company has hit hard times with its CEO Dov Charney forced to sell a large chunk of his shares to private equity company Lion Capital, according to the New York Times.

Excerpt:

That loan occured last month, according to a filing with the SEC.

That’s a small sum in AA’s terms. Shortly after, the company took $80 million from Lion Capital in the form of long-term debt. Why would Charney loan his own company chump change if he knew that significant new financing was on its way?

Here’s two speculative theories: The first is that he didn’t know that Lion would cough up the money, and as his company flirted with bankruptcy over Xmas that $4 million may…

And, WWD:

Asked why he was confident the company would be able to pay down debts, including its new $80 million Lion Capital loan, when it already ran into trouble with its previous $51 million debt with SOF, Slater pointed to the strong fundamentals at American Apparel and the long-term nature of the new debt. “The company is one of a select few in retail generating both top- and bottom-line growth. They are generating a ton of cash flow — its estimated 2008 EBITDA [earnings before interest, taxes, deprecation and amortization] is $71.5 million and for 2009 will be $89 million,” he noted.

Careful planning is foremost in Charney’s mind this year. “We plan to run the business for cash flow this year,” Charney noted, adding the company has a “restrained” plan for store openings to add to its current 260-unit base

But, via Black Book, in “Could the end be near for American Apparel?”

According to the New York Post, American Apparel is facing adversity that could leave the mega retailer high and dry. Fourth quarter sales are down 23% as of this past Friday. Apparently in the past year and a half American Apparel has had difficulty keeping “their shelves fully stocked thanks to the vise-like grip on cash kept by Lion Capital, [a major stake holder and] the London-based investment firm whose March 2009 financing deal saved Charney’s bacon.” …<

…when the feds raided American Apparel’s Los Angeles warehouses last summer and “charged that one third of the workers at the retailer’s Los Angeles factory were illegal immigrants,” the loss of so much of the company’s workforce was crippling. Despite Charney’s longtime championing of workers’ rights, it’s the hiring of illegal ones that may be his downfall…

american apparel business  profits

Still, all this talk seems mostly fodder for bored bloggers’ traffic (like mine, and others). American Apparel has great buzz, love ‘em or hate ‘em (all publicity = good publicity, you know the drill). They have a well-established supply chain, and fill a fashion niche aggressively and thoroughly.

Perhaps most crucially, they got the loyalty of the LOHAS/green/hippiester demographic. You know; you.

So if you’ve been eyeing some tacky gold metallic leggings or knee-high b-ball socks, now’s the time: go support this uniquely fascinating experiment is American business.

PS: Dylan, for now, I’d hold onto your AA stock.

About Waylon Lewis

Waylon Lewis, founder of elephant magazine, now elephantjournal.com & host of Walk the Talk Show with Waylon Lewis, is a 1st generation American Buddhist “Dharma Brat." Voted #1 in U.S. on twitter for #green two years running, Changemaker & Eco Ambassador by Treehugger, Green Hero by Discovery’s Planet Green, Best (!) Shameless Self-Promoter at Westword's Web Awards, Prominent Buddhist by Shambhala Sun, & 100 Most Influential People in Health & Fitness 2011 by "Greatist", Waylon is a mediocre climber, lazy yogi, 365-day bicycle commuter & best friend to Redford (his rescue hound). His aim: to bring the good news re: "the mindful life" beyond the choir & to all those who didn't know they gave a care. elephantjournal.com | facebook.com/elephantjournal | twitter.com/elephantjournal | facebook.com/waylonhlewis | twitter.com/waylonlewis | Google+ For more: publisherelephantjournalcom

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9 Responses to “American Apparel going out of business?”

  1. Rod Meade Sperry
    oh no, what would all the charneys do?

    JM
    Not a fan of the founder or their style of promotion. So I can't say I'm sad.

    Liz
    And we care because…?

    Mira
    Making room for Sweet Skins Organic Apparel. http://www.sweetskins.com
    So turns the tides of time…..

    Waylon Lewis
    Wow, Aunty. Because they employ thousands of Americans, and are probably the most eco-responsible big apparel company in the world today. Goes way beyond their admittedly off-kilter founder.
    2 seconds ago ·

  2. Rod Meade Sperry
    i think the point is that Dov and his tactics are so repellent that they dont outbalance the good. i can spend my money elsewhere, supporting good practices without supporting advertising that i find detestable.

    Waylon Lewis
    I hear you: but where else, exactly, Rod? Other than vintage or a few awesome smaller ecofashion lines, I can't think of a more responsible option.

    Mira
    What's so Eco about American Apparel? Isn't all that fabric coming from China anyway? I really doubt that cotton is grown and processed in the US! They generate some electricity at their factory. And have a teeny tiny line of organics, probably amounting way less then 1% of their revs? Is that really enough to be considered an Eco company, really, today?

    Liz L
    Thanks! I have never shopped there and knew nothing about them.

    Rod Meade Sperry
    yeah, i'm just thinking small, indy myself, Way. and honestly, i dont see how giving a company that has replicated child porn, stolen from Woody Allen, and consistently portrayed females as objects (all this in its ads) is any worse than supporting non-Eco, or even non-American.

    but maybe that's just me.

    Waylon Lewis
    Well, we separate the baby from the bathwater. I see what they DO as far more impactful, and pioneering, than how they PUBLICIZE it. We've criticized, many times, their ads. It's a tough question, admittedly.

    Waylon Lewis
    Mira, 90% of the cotton blanks sold in the US to indy fashion lines are AA. If you want to marginalize the biggest company, by far, making their wares with US labor, go nuts.

    I'm not defending their ads, again. I'm defending their many unique initiatives, like defending gay rights as a company? Any other companies have the guts to do that?

    • Jennifer says:

      It is NOT gutsy to support and defend gay rights while also exploiting women for financial gain. This is the easy road to take and not a new avenue for American corporations. Many companies choose various "trendy" (as in, these are issues AA claims to support, but only for financial gain) movements to promote, such as gay rights or eco-friendly products, while continuing to exploit and minimize women. It would have been gutsy if the founder could have found a way to encourage eco-friendly spending without using highly sexualized female imagery to get sales. Continuing to draw attention to his "controversial" ads does not help matters. This is his goal. Blog posts like these only serve to give American Apparel FREE advertising. I do not consider images of scantily clad females as "controversial" anymore. As I said before, I consider it lazy.

      • elephant journal elephantjournal says:

        "Blog posts like these only serve to give American Apparel FREE advertising."

        True, true—but if said images are disliked by audience, false, false. This isn't advertising. This is commentary.

  3. lis.b says:

    I seriously dislike American Apparal and could give a rats that they are closing.

    Their coporate law sucks. At the register they hide this tiny little sign that says "no returns". I bought a dress one day for a wedding party. Walked across the street and bought another one. Came back LITERALLY 5 minutes later and they wouldnt let me return it. They told me that it was my responsibility to read this little sign when checking out. WHAT?! Who reads plastic little signs hidden nicely on the counter with misleading language and font sizes skewed so that even if you look at it your eyes will grab on something OTHER than the return policy.

    I emailed corporate a thoughtful and Looooooooooooooooong email requesting they discuss this with me and never heard a SINGLE word.

    I vowed to never spend a single cent there again and havent. screw them.

  4. Ben says:

    Worst fitting t-shirts ever.

  5. elephant journal elephantjournal says:

    Signs continue to point to yucky. Hopefully things will turn around for this imperfect but exciting experiment in USA-made, ecoish, vertical integration
    Rumors just Rumors: American Apparel going out of business? | elephant journal http://www.elephantjournal.com
    Since selling out, American Apparel profits collapse.

    Michael P Adams likes this.
    *
    o
    Mira Fannin yawn.

    o
    Kitty Kaler i have such a love/hate relationship with American Apparel, I kinda hope they disappear and this terrible relationship can be over once and for all. I want real love in my clothing company. The whole shebang.

    o
    Azlan Halloran
    I'd like to see a graph depicting the percentage of the rising debt of American college students that ended up spent at American Apparel. I'm no longer a student so the lil' money I have gets spent on food, shelter, inebriants sometimes ra…ther than the mass produced kitsch hipster crap-fashion they push. Here in Brooklyn the American Apparel had its store front windows smashed in by some over-active "activist". Apparently, they needn't have bothered.

    I do support their porn star rehabilitation program, though – in spirit anyway if not in patronage. Being a model is way easier than having to work for a living and let's face it, after the thirty fifth "real virgin gang-banged" scene I think some one has earned the opportunity to get paid for simply laying around in a pair of horrid lycra pants. See More

    o
    elephantjournal.com Kitty, I personally think that they are, overall, a great company that's demonstrated that made in USA is still not only practicable but better in some ways. They've done a lot of eco fashion. They treat 99% of their employees right (well, except for Dov of course, who's pretty out there), offer free ESL classes etc., they're active in immigration issues and gay rights. Downside: I personally love their edgy hipster cynical fun ads, but many feel they're exploitative.

  6. [...] elephant articles on American Apparel go here, here, and here. Krystal Baugher recently moved to Boulder from Chicago where she earned her MA in [...]

  7. When can you get the best prices on winter baby clothes, especially coats? My usual store isn’t selling them now. Do I have to wait until Spring again to get a deal??

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