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American Apparel Founder Says Company Can’t Survive Without Him

The largest producer of American-made clothing filed for bankruptcy Monday, just nine months after ending its first stint under court protection.
Dov Charney | Photo: Elizabeth Weinberg
By
  • Bloomberg

NEW YORK, United States — American Apparel Inc. founder Dov Charney, who was ousted by his own board for misconduct in 2014, said the retailer's latest bankruptcy filing shows that the company can't stay afloat without him.

The largest producer of American-made clothing filed for bankruptcy Monday, just nine months after ending its first stint under court protection. Even with an injection of cash and a reduction in debt, a turnaround plan led by Paula Schneider, who replaced Charney as chief executive officer, failed to revive American Apparel’s fortunes.

“This company can’t survive without my leadership,” Charney said in an interview on Monday. “They didn’t know how to run it. They took a company that could have lasted a century and crashed it into the wall.”

The Los Angeles-based company plans to sell itself at auction to Gildan Activewear Inc., which has a leading offer of $66 million. Gildan will continue selling American Apparel’s basics, like plain t-shirts, to screenprinters and promotion companies. But the bid doesn’t include American Apparel’s almost 200 stores, so if it lives on as a consumer-facing brand under Gildan, it would have to be sold through other retailers.

A spokeswoman for American Apparel declined to comment.

The company’s results were mixed under Charney, who took it public in 2005, and its sales decline accelerated after he was pushed out. Revenue fell 18 percent to $497 million in 2015. Since emerging from bankruptcy in February, revenue has sunk 33 percent from the same period a year ago. Under Charney, sales peaked at $633.9 million in 2013.

“At what point do they say we made a colossal mistake and destroyed the largest US apparel company?” said Charney, who is working on a clothing startup that’s also based in Los Angeles.

In an attempt to regain his place, Charney teamed up with hedge fund Standard General LP and borrowed about $20 million from it to buy more stock. Charney says the hedge fund promised to reinstate him, but Standard General said that wasn’t the case. The first bankruptcy wiped out Charney’s equity stake, which served as collateral for the loan, and now Standard General is suing him.

The former chief executive officer then found financial backers that were interested in buying the company and bringing him back, including a bid during the first bankruptcy for $300 million. But those overtures failed as bondholders led by Monarch Alternative Capital took control.

Charney started the forerunner to American Apparel in the late 1980s, eventually turning it into an irreverent global brand. The company became known for making clothes in America at a time when most apparel manufacturing had moved to Asia’s cheaper labor markets. The company also attracted attention with its racy marketing, a push to change US immigration laws and accusations of sexual harassment against Charney, which he denied.

“The lesson is there has to be some respect for entrepreneurship and management,” Charney said. “They didn’t respect my management team and creative team. We built an extraordinary business.”

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

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