American Apparel makes a comeback in the USD community
By Rebecca Lukito
American Apparel is the largest clothing manufacturer in the United States and a wholesaler and retailer with its own design and marketing. It sells basic clothing items for both men and women as well as children. They are also quite notorious for their overly sexual ads. In the past few years, American Apparel has taken a downturn and has faced many lawsuits as well as bankruptcy due to both the actions of founder Dov Charney and the decline in sales.
In fact, many USD students hadn’t heard of American Apparel until they got to college.
“I had never worn American Apparel before, but now all my shirts for clubs and for my sorority are from there” said sophomore Julia Gautho. “I think it’s so appealing because of the quality of the clothes and the fact that everything is American made and simple.”
American Apparel was started by Dov Charney, Sam Lim and Sam Kim when Charney was a student at Tufts University.
The legal woes began in 2004, when Charney was accused of sexual harassment. Charney now faces a total of nine lawsuits filed by former employees in regards to sexual harassment, naked photos and enslavement. Although American Apparel was sold to Endeavor Acquisition for more than $380 million in 2006, Charney stayed on as president and Chief Executive Officer.
In 2008, Charney insulted his Chief Financial Officer, Ken Cieply which caused him to resign. Due to this, American Apparel stocks took a turn for the worse. At this point in time, American Apparel had expanded throughout the nation and even opened new stores in the UK. In March of 2009, American Apparel had to take an $80 million loan from Lion Capital to avoid bankruptcy.
A few months later, Woody Allen sued the company for their unauthorized use of his picture in one of their ads. They had to pay $5 million to Allen. Then, in September of that year, American Apparel had to let go of more than 1,000 employees because a raid by the Immigrations and Customs Enforcement discovered that many employees in their Los Angeles based factory did not have legal status in the United States.
In 2010, the New York Stock Exchange/AMEX threatened to delist American Apparel because of delays in the second quarter filing.
Around that same time, Deloitte & Touche resigned as auditor due to concerns regarding financial disclosure. At that same time, the U.S. attorney in New York started investigating American Apparel.
Eventually, a shareholder filed a lawsuit claiming that American Apparel knowingly hired illegal immigrants. This placed the finances of the investors in danger as well as made it clear that members of the company were lying about the financial status of the company to investors.
After all these struggles, American Apparel started to make a comeback between 2010 and 2011, when Dov Charney realized that he could not handle the company by himself. Tom Casey, who used to work for Blockbuster became acting president, while John Luttrell was named executive Vice President and CFO. David Danzinger was placed on the board while Jordan Schiff became GMM and Stacey Shulman became CTO.
American Apparel also stopped the expanding and instead, decided to focus on making the remaining stores better and more efficient. Soon, sales started rising with a 14 percent increase in January of 2012.
However, they still faced the issue of bankruptcy. They could not find a way to pay back the loan from Lion Capital as well as loans from Bank of America. The answer came in the form of George Soros and Crystal Financial, who loaned $80 million to the company so they could avoid bankruptcy. Things started looking up when Charney started winning lawsuits and the reduction in net loss for the quarter showed growth.
Many USD students buy clothes from American Apparel because many of the styles they sell are basic and easily coordinated to go with most outfits. Many sororities and fraternities on campus order shirts in support of their organization.
“Kappa always orders American Apparel shirts and they’re soft, fit nicely and last long” said junior Amanda Johnson.
Although American Apparel is stereotypically used for sorority shirts, the fraternities on campus have been spotted repping their letters on American Apparel clothing as well.
“We use American Apparel for many of our shirts as well” said junior Ian Rodgers.
One aspect of American Apparel that contributes to the rising growth is their loyal customer base. There are some people who are willing to pay the higher price of American Apparel clothing because of the quality of the material and the fact that the clothing is made in the United States. American Apparel is on the rise again and perhaps one day, they will be as great as they once were.