American Apparel Inc. (APP), the clothing chain that raised cash earlier this year to avoid a shortfall, is in talks to replace two of its six board members, according to three people involved in the discussions.
The group of investors that bought $14.9 million of stock in a private placement in April is part of the negotiations, said the people, who declined to be identified because the talks are private. Chairman and Chief Executive Officer Dov Charney will remain on the board, the people said. The changes may be announced this week.
The investors, led by CoolBrands International Inc. co- founder Michael Serruya and private-equity firm Delavaco Capital, may purchase about $8 million of additional shares in the coming weeks, two of the people said. The group received the right to buy 27.4 million more shares at 90 cents each in April.
Peter Schey, an American Apparel spokesman, didn’t respond to e-mail and telephone messages seeking comment.
American Apparel, which operates more than 250 stores, had an $86.3 million loss last year and amended loan agreements to avoid breaching debt covenants. Charney, the company’s largest shareholder, said much of the losses and falling sales were due to the costs and productivity declines related to replacing 2,500 workers after immigration violations in 2009.
American Apparel gained 6 cents, or 7 percent, to 92 cents at 4 p.m. in NYSE Amex trading. The Los Angeles-based company’s shares have tumbled 94 percent from a closing high of $15.80 on Dec. 11, 2007.
The company’s sales have improved this month as revenue from stores open at least a year increased, the people said. So- called same-store sales may be little changed or decline less than 1 percent this quarter, one of the people said. Sales by that measure sank 13 percent in 2010 and 8 percent in the first three months of this year.
Shareholders re-elected board members Robert Greene, a management consultant, and Allan Mayer, a partner at public relations firm 42 West LLC, at the company’s annual meeting on June 21.
Mark Samson, a manager director at restructuring firm Getzler Henrich & Associates LLC; Mark Thornton, a management consultant, and Adrian Kowalewski, American Apparel’s former chief financial officer and current head of corporate strategy, fill out the current board.
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