American Apparel CEO Wants Less Skin But Will Still Be Edgy

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American Apparel CEO Adds New Angle to Edgy Brand

Paula Schneider, American Apparel Inc.’s new chief executive officer, wants the brand to be as provocative as it was under expelled founder Dov Charney. Just with less skin.

“It doesn’t have to be overtly sexual,” Schneider said in her first wide-ranging interview. “There’s a way to tell our story where it’s not offensive. It is an edgy brand. And it will continue to be an edgy brand.”

Schneider, an apparel-industry veteran who has led private-equity backed companies and ran the swimwear division at Warnaco Group Inc., has been in the job only a month and is still formulating her strategy. But it’s already clear that she wants to build on the battered chain’s underlying strengths.

Marketing will be less sexualized and will instead dive into the social issues of the day, including gay rights and anti-bullying. Schneider, 56, also plans to highlight the chain’s made-in-America wares and remind consumers that it pays factory workers more than rivals pay those toiling overseas.

“No one knows we’re the biggest apparel manufacturer in North America,” said Schneider, who provided a tour of the company’s Los Angeles factory where she has her office. “That message hasn’t been told. It’s taken a back seat."

Charney declined to comment.

Tumultuous Era

Schneider’s arrival brings to a close a tumultuous era, during which Charney was accused of sexually harassing female employees and being an erratic manager. American Apparel’s inherent strengths, including a strong connection with millennial shoppers, have been overshadowed by coverage of Charney’s tabloid-ready personal life, criticism of the chain’s suggestive advertising and financial woes that forced the company to raise cash several times to survive. This all came to a head last year when the board fired Charney, a decision that was upheld in December when Schneider was named CEO.

Schneider intends to impose corporate discipline on a chain that was for years managed in an ad-hoc fashion. She’s already hired a new head of planning and forecasting to make the company better at matching production with demand, which could save money on overtime and reduce markdowns.

‘‘There’s a lot of opportunity, and it’s mostly in the fundamentals,” Schneider said.

Colleen Brown, who became chairman in December and helped recruit Schneider, said the lack of strong systems and processes is holding the company back. American Apparel doesn’t even have an organizational chart, she said.

‘Incredible Company’

Charney “has built an incredible company -- quite an incredible brand, but in many ways this is the hardest way to run a company,” Brown said in a separate interview at the L.A. factory. “There’s not an ability to do the routine stuff and just have it happen without worrying about it. The routine stuff takes work here.”

Schneider and Brown have a lot of work to do.

In the third quarter, the last to be reported, sales fell 5.3 percent to $155.9 million. The shares sank to 53 cents on Dec. 2 before rallying later that month after the company received interest from a potential buyer. The board is currently evaluating that approach. The shares gained 1.6 percent to 93 cents at the close in New York.

The fact that Charney endorsed Schneider as his replacement helped ease her arrival at a company where loyalty to the founder remains strong. She first met with Charney in October when he was suspended from the company and his return was still a possibility. She then won the job and initially Charney was to remain at American Apparel.

No Fight

That didn’t happen after Charney turned down the position because he didn’t like the terms. He remains committed to returning to the company in some capacity.

“Walking in here, it wasn’t a fight,” said Schneider, who still talks to Charney on a regular basis.

So far top executives have stayed. That includes Marty Bailey, chief manufacturing officer; Pat Honda, president of wholesale; Nicolle Gabbay, president of retail; and senior creative director Iris Alonzo.

The company’s spring marketing campaign will focus on the top 100 styles at American Apparel in a bid to remind consumers of all the basic items it offers -- like a short black skirt, Schneider said. She’s also looking at doing more collaborations with artists and designers.

The brand can broaden its appeal too, Schneider said. She is currently tallying up all the styles the company sells, and their target shopper, to find holes in the assortment. She said American Apparel can do a better job going after more 30-something women and moms.

‘Millennial Customer’

“The beauty of this company is that it’s a millennial customer,” Schneider said. “So many people are trying for that and have no way to get there. We have that. And we can expand the demographics.”

As Schneider walked through the 800,000 square-foot factory in L.A.’s warehouse district, she explained that having in-house manufacturing means American Apparel can respond to shifts in an industry where trends change quickly. Other apparel makers must wait for clothes to cross the Pacific.

“If it resonates with the consumer, then you can be the quickest one out there,” she said. “No one has the ability to do what we do.”

‘A City’

The factory can make 1 million garments a week. A seven-story labyrinth of tight stairwells and freight elevators, the space intertwines old-world apparel making, back-office operations, a health clinic and modern office workers. On one floor, coats are being made a short walk from the 20-somethings who run the company’s Twitter and Instagram feeds. On another, workers cut layers of fabric with jigsaws and down the hall is a room where clothing labels are printed.

“It’s a city,” Schneider said.

Descending from the sixth to fifth floor, she said: “I’ve never been this way.”

In the interview, Schneider wanted to make it clear that American Apparel isn’t running away from sex. She pointed out that the company’s major promotion for Valentine’s Day was called Pantytime -- including a YouTube video of models dancing in their underwear.

“It has to be a little sexy,” Schneider said. “We sell lingerie. We sell hosiery. You just make sure we aren’t crossing the line. It should be about empowering women, empowering people.”

(Updates with factory advantage below “Millennial Customer” subhead.)
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