As of Thursday, April 2, 2015
With the company hemorrhaging losses and too many styles in its clothing repertoire, American Apparel is laying off 180 workers at its downtown Los Angeles clothing factory.
The layoffs were expected to be completed by April 3, Good Friday, sources close to the company said. The company employs 4,300 workers at its manufacturing facilities and offices and a total of 10,000 workers in its various divisions and retail stores worldwide.
The decision to let the garment workers go comes three months after Paula Schneider took over as the new chief executive, replacing the company’s founder and former president and chief executive, Dov Charney.
Schneider has repeatedly said the apparel venture manufactures too many different items—4,000 styles in all—which range from leggings, underwear and swimwear to T-shirts, blue jeans and dresses. The company wholesales its garments and sells them at 239 American Apparel stores located in 20 countries.
“While we were disappointed that we had to make this very difficult decision, it is important that everyone understand that American Apparel is managing a turnaround,” said Schneider in a statement. “This change is meant to help restore the financial health of the company, which under previous management saw losses of more than $300 million over the past five years. Layoffs are not new to American Apparel. Under Dov Charney’s leadership, in 2013, 160 employees were laid off, and in 2014, prior to his departure in June, 238 employees were laid off. Of these groups, only 10 percent of employees were given severance pay. This week, our new management team is offering severance to every employee affected by the layoff. This has been a difficult week, but we have to conduct business differently in order to thrive.”
The layoffs are the latest in the ongoing turmoil that has enveloped the company, founded in 1998 by Charney, who elevated the brand to a must-have item with the help of risqué advertisements and headlines about alleged sexual harassment. But in recent years the company has seen increased competition from fast-fashion retailers.
“The company is not managing a turnaround. It is managing a severe decline in sales that has taken place under the stewardship of a hedge fund,” Charney said in an email. “Right now the company is laying off qualified workers, some of whom have worked for the company for more than 12 years. The bottom line is the company is facing a sales crisis that began after my ousting and the ousting or departure of dozens of my colleagues. In the spring and summer of 2014, we were hiring workers— not laying off workers. I was personally involved in that effort.”
In June, the board of directors suspended Charney from his duties while a special committee conducted an investigation into alleged financial misconduct and sexual harassment. He continued working as a paid consultant. At the end of December, the board fired Charney, who still owns 43 percent of the company’s stock.
In its recently reported fourth-quarter earnings results, American Apparel said it had a net loss of $28 million on $153.5 million in sales compared with a net loss of $20 million on $169.1 million in sales for the same period in 2013.
During the last five years, its net losses have totaled more than $300 million.