American Apparel Cutting Workers and Costs to Improve Its Financial Pulse
Six months after taking the helm, the new chief executive at the beleaguered American Apparel announced the Los Angeles company will be going to the chopping block to cut at least $30 million in costs and close poor-performing stores.
The realignment of the retail sector means there will be some elimination of jobs. “Among other initiatives, cost-cutting measures will include closing underperforming retail locations to drive productivity improvements,” the company said in a press release issued on July 6. “In connection with these store closures, the company will streamline its workforce to reflect a smaller store footprint and general industry conditions.” New stores may be added in more lucrative locations, the company said.
The cost-cutting plan, which was devoid of any specifics, will take place over the next 18 months, starting immediately. It is meant to put the company that employs 10,000 people on a better financial course. American Apparel, a totally vertical operation that encompasses the largest apparel factory in the United States, has 239 retails in 20 countries.
For several years, it has been bleeding money with annual net losses putting it close to bankruptcy.
In 2014, the company lost $68.5 million on $608.9 million in revenues, and in 2013 it lost $106.3 million on $633.9 million in revenues.
The company warned that even with these cost-cutting efforts, “there is no guarantee the company will have sufficient financing commitments to meet funding requirements for the next 12 months without raising additional capital, and there can be no guarantee that it will be able to raise such additional capital.”
It is also defending itself from around 20 lawsuits filed by founder Dov Charney, who was fired in December, and his associates.
The new strategic turnaround plan includes introducing a more trend-oriented Fall 2015 collection for men and women that goes beyond the basics American Apparel has been known for. “Historically, the Fall season has not been a major focus for the company,” said American Apparel Chief Executive Paula Schneider, who came on board on Jan. 5. “We are beginning the process of re-merchandising the product assortment to our retail stores to increase productivity by SKU.”
Going forward with its new initiatives, American Apparel announced two new executive hires. Christine Olcu is on board as the general manager of global retail, and Brad Gebhard is the president of wholesale. Both are expected to implement the company’s global retail and wholesale turnaround strategies.
Olcu will lead American Apparel’s current retail managers in optimizing merchandising and sales at the company’s stores. Olcu has worked at retailers such as Express, Mexx Canada, Indigo Books, Music Inc. and Club Monaco. She will be helped by Nicole Gabbay, American Apparel’s long-time president of U.S. retail.
Gebhard, who has been working for the company for the past four months as a consultant, will focus on increasing the company’s business-to-business sales. In addition, he will oversee Oak, the four-store specialty chain acquired by American Apparel in 2013.