American Apparel's glory days are over, and founder and chief executive Dov Charney, who is now beardless, hopes that is only temporary. Things may seem fine in New York, where they pretty much are, but other American Apparel stores are causing the company to lose quite a bit of money. Adding to Charney's financial woes: Immigration authorities forced him to terminate 1,500 factory workers, further driving up his costs. Also making his business more expensive and complicated are his expanded product offerings, such as blazers and real pants — stuff that isn't lamé or spandex.
Today's WWD headline "American Apparel Focuses on Fundamentals" would have been a no-shit statement years ago. But when was the last time they actually focused on fundamentals? It used to be leggings, tanks, tees in all sorts of colors. But now it's crazy circus pants, scrunchies, lace body stockings, assless tights. Fundamentals — the basics the brand was once known for — they are not.
Last year, sales in stores open more than a year declined 10 percent. They rose 22 percent in 2008 and 29 percent in 2007. The chain expects a 10 percent decline for the first quarter of 2010. American Apparel is in debt $83.4 million, with $65.6 million owed to Lion Capital, which saved the company from bankruptcy about a year ago.
So for now, the company plans to hold back on opening new stores. The U.S. ones are generally fine, but European and other international stores are losing money. Charney plans to open only three new stores in 2010, after opening 21 last year and 40 in the second half of 2008.
But though Charney has let go of his beard, he hasn't let go of his dreams! He hopes to open 25 to 30 stores in 2011, and eventually overlord a total of 600 to 800 American Apparel stores (he currently has 282). He even has visions of stores in airports, smaller kiosk stores, and stores that are dedicated to one thing, like women's swimsuits or scrunchies. Maybe, one day, an American Apparel scrunchie kiosk!
But before all that happens, Charney needs to pay off some debt, and so he'll return to his "push with more skirts and hair bows."
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