For A Failing Company, American Apparel Has Big Dreams

Posted by Sara Zucker on April 5, 2010 08:17 AM

Despite what CEO Dov Charney has said to reporters, American Apparel can officially join the ever-growing list of retailers struggling in today's recession. Consumers are simply shying away from expensive products. American Apparel, with its signature jersey t-shirts costing an average of $20, is poised for trouble.

The American Apparel brand has had its fair share of problems this year, including employment issues with illegal immigrants. A discovery from US Immigration and Customs Enforcement forced the company to fire over 2,000 unauthorized workers. Such a loss affected production and led to the retailer's plummeting value – at $3.16, its stock has decreased by more than 50 percent since this time last year.

Charney, however, remains optimistic: "There are a lot of things we learned from this year. It's a very sophisticated business model, but it's in its infancy. There's probably another five years of work here before we can say that we've landed the plane." But as competitors accommodate price-conscious shoppers with sales and discounts, American Apparel has been stubborn in refusing to lower prices.

The character flaws of a once-popular, and supposedly ethically sound corporation has caused stores to close and customer approval to sour. Lion Capital, a majority shareholder of the company, stepped in to assist by supplying an $80 million loan primarily focused on paying off the debts that have ensued.

So how does Charney expect to expand as sales diminish? According to The Cut, he envisions kiosks and smaller locations dedicated to specific clothing styles like swimsuits. Good luck with that.

More about: Fashion, Dov Charney, American Apparel, US Immigration And Customs Enforcement, Lion Capital

Stephen Malouf says:

Here is the problem. I walked in to an AA store in Montreal the other day on Mount Royal Street East and took a good look at the merchandise. My opinion is biased because I am an apparel veteran. I would not buy their T for $ 20 because you can buy a better T at Zara or H+M or even Joe Fresh for much less. It's a $ 3 Gildan T; not a $ 20 Brand......The store looks cheap.... Retaill 101 ??? You cannot sell a $ 20 T in a cheap location. Let's face it, AA is a blank T company trying to get into retail and just hasn't got its act perfected. Once it does, maybe I will buy.....but Dove, you got to make a better looking T.....a la alternative, a la urban outfitters.

April 6, 2010 08:58 AM #

pea says:

I'm just a regular consumer I suppose. I don't particularly look like any of the models featured in AA ads and I'm no hipster. But I am a loyal AA customer. Why? Stephen above was right that there are cheaper alternatives available. I recently accidentally ordered a Gildan shirt from CafePress. What a difference! You cannot compare a Gildan to anything made by AA! As for Zara and H&M their apparel isn't much cheaper and usually comes emblazoned with gaudy designs. There's nothing like wearing an AA triblend for instance. Nothing. And the fact that it's not made in some 3rd world sweat shop makes the experience that much sweeter. I know Dov and American Apparel will stay the course. They are in it for the long run and I have faith in them. As far as my friends and I are concerned, our apparel wearing lives are divided into 2 distinct periods. Before AA, and After AA. The former were the dark ages and the latter a period of divine cotton enlightenment. I hate to say it but Sara Zucker sounds a bit bitter. Given the highs and lows of the current economy, AA is hardly a failing company.

April 6, 2010 02:57 PM #