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.