Monthly Archives: August 2010

The end to American Apparel?

Its brightly coloured leggins and  jersey hot pants were once reserved for the trendy young things of LA.

Now American Apparel items can be spotted on almost any street, on any corner of the world, and they’re no longer exclusively for those in skinny-jeans and thick-rimmed glasses.

However, the fashion giant is not doing well financially.

Rumours have been spinning for months about the money worries of the company who employ around 10,000 people, and now it faces a federal investigation over a change in accounting firms.

Since opening in 2003 there are now 279 stores spread across 29 countries, including 15 in the UK. But the store predicts to make big losses this year and its debt increased 32% to $120.3 million during the second quarter while like-for-like sales were only 16%.

The company is run by Dov Charney, who has created enough headlines to destroy a small forest with scandalous stories of his sexual antics, in and out of the office. Charney has been charged on many occasions for sexual misconduct at work and is alledged to wonder around the LA warehouse in his boxers ordering female members of staff to perform sex acts on him.

The company has also come under fire for its low budget, highly provocative, advertising campaigns which have been banned in many countries.

Charney owns 53% of the company, and is currently in talks with lenders as it’s believed the financial situation is so dire they won’t even be able to make the next monthly payment to British private equity firm Lion Capital, who gave them a £51 million rescue loan last year.

The firm said there was substantial doubt the company will be able to continue and its share price has fallen 55% already this year.

The future is uncertain for the trendy American fashion label who last year had to fire 1,500 immigrant workers who could not provide accurate documents.

They pride themselves on being sweatshop-free and making all the products in LA and the high prices  reflect the costs of paying their workers a decent wage. This is commendable and rare in the fashion world but possibly a model, combined with a run of bad luck and a controversial director, that won’t live out the year.

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