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American Apparel to Raise Money With Stock Sale After Wider Loss

American Apparel Inc., the retail chain facing a legal fight with ousted founder Dov Charney, plans to raise money with a $10 million stock sale after posting a wider first-quarter loss.
By
  • Bloomberg

LOS ANGELES, United States — American Apparel Inc., the retail chain facing a legal fight with ousted founder Dov Charney, plans to raise money with a $10 million stock sale after posting a wider first-quarter loss.

The deficit expanded to $26.4 million, or 15 cents a share, from a loss of $5.47 million, or 5 cents, a year earlier, the Los Angeles-based company said in a statement Monday. Revenue fell 9.4 percent to $124.2 million. The $10 million stock sale will be handled by Cowen & Co., American Apparel said.

Chief Executive Officer Paula Schneider is trying to reinvigorate sales and stem red ink after the tumultuous exit of Charney last year. The chain has lost hundreds of millions of dollars over the past three years and has had to raise money with stock sales to stay afloat.

Charney was fired in December for alleged misconduct that included sexual harassment and misuse of funds. Since then, Charney has fought to return to the clothing company. He remains the company’s largest stockholder, although he shares voting rights with hedge fund Standard General.

American Apparel’s board suspended Charney from the CEO job last June for alleged misconduct. It fired him in December after an investigation and named Schneider to the post.

During this volatile period, the retailer’s results worsened. The company also has racked up legal costs related to Charney. In March, it borrowed $15 million from Standard General at 14 percent interest to help it make an interest payment on its bonds.

Since taking over, Schneider has shaken up the executive ranks by firing some long-time Charney supporters and bringing in new design executives like Joseph Pickman, formerly of the Band of Outsiders brand.

By Matt Townsend; editors: Nick Turner, Kevin Orland.

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