California Apparel News

Los Angeles–based American Apparel, the largest apparel factory in the United States, continued to battle financial woes with its third-quarter net sales dipping 5 percent.

Revenues for the third quarter, ending Sept. 30, were $155.9 million compared with $164.5 million during the same period last year. Net loss for the most recent third quarter expanded dramatically to $19.2 million compared with $1.5 million a year ago.

As of Sept. 30, American Apparel had an accumulated deficit of $297.3 million, up from $256.4 million on Dec. 31, 2013.

The third-quarter news came just weeks after Scott Brubaker in late October was named the interim chief executive officer, a post once held by American Apparel founder Dov Charney, who was suspended by the board last June because of allegations of misconduct and inappropriate behavior with employees. A special committee was formed to oversee the continuing investigation into Charney’s alleged misconduct. The suspension and internal investigation have resulted in $5.4 million in legal and consulting fees during the third quarter.

Since Charney’s suspension, it has been a topsy-turvy world for an apparel company that started out making blank T-shirts and now, with 10,000 employees, manufactures and sells a wide array of clothing often portrayed in provocative ads in print publications and on billboards.

The boardroom has seen a game of musical chairs with old members leaving and new ones arriving. In July, four new board members were named. They were Joseph Magnacca, chief executive of another troubled retailer, RadioShack, and Colleen Brown, the former chief executive of Fisher Communications. Brown has been on the boards of other public companies and became American Apparel’s first female board member.

Also added to the board in July were David Glazek of Standard General and Thomas Sullivan, a turnaround expert. On Aug. 13, the company named Laura A. Lee as the fifth new board member. Lee is currently the head of East Coast content partnerships for Google/YouTube, where she oversees more than 150 television, film, new media and original entertainment partnerships.

American Apparel has many challenges ahead. The company, with 245 stores in 20 countries, saw its same-store sales drop 7 percent in the third quarter from last year. Its online sales dipped 5 percent.