American Apparel Is Still Losing Moneyby
It’s been a while since we’ve heard from American Apparel (if, that is, you didn’t pay much heed to the predictably provocative back-to-school ads it posted on its U.K. Instagram account, along with the criticism that followed.) As you may remember, the board of directors ousted the company’s founder and chief executive, Dov Charney, in June. By the end of July, most of them had left, too. The new board said yesterday that it will miss the deadline to report the company’s second-quarter results. Members need more time to review financial statements and ask questions of management.
The company did, however, offer some preliminary figures: American Apparel is still losing money—about $15 million. But it lost $38 million during the same three-month period last year. Sales, which came to about $162 million, were little-changed. The company has now lost about $290 million since 2010 as sales were weakening and a malfunctioning distribution center raised costs last year. It has $200 million worth of debt, too. Yet, considering all that’s gone at the company this summer, a smaller loss almost counts as good news.
From the moment he was dismissed, Charney denied the allegations and fought to keep his job. During a furious few weeks, he handed over his 27 percent stake in the company to Standard General, a hedge fund in New York that now owns 44 percent of the company. Charney’s fate will be decided by three members of the board, the so-called Suitability Committee, after an investigation into his alleged misconduct by an outside firm. Back in July, Charney told me that he believes Standard General will treat him fairly. He is now a paid consultant, with no official authority over employees.
In the shake-up, the company appointed its first female director: Colleen Brown, a longtime media executive. She is on the Suitability committee. So is Thomas J. Sullivan, a turnaround expert who sits on the board of Media General, an additional company in which Standard General has invested. David Danziger, an accountant from Toronto who took over as co-chairman after Charney’s ouster, is on the committee, too. No word yet on when they’ll make a decision about Charney.