WEDNESDAY, SEPTEMBER 1, 2010

The rise and fall of American Apparel

How youth-club chic burned bright, American Apparel, the ethical clothing firm then faded away with a controversial

CEO, is facing By Imogen Fox bankruptcy The Guardian, London Few high street retailers are able to claim By Amelia Hill the rights to an entire look for any stretch The Guardian, London of time. But between 2007 and last year, US retailer American Apparel did exactly wasn’t having oral sex that — the label was responsible for a with an employee in front trend that could genuinely be termed of a female journalist that the American Apparel look. It now threatens to undo The American Apparel trend Dov Charney, founder of American was instantly recognizable and held Apparel. Nor was it simulating oral a vice-like grip on the under-25s sex with another female member of — male and female. The sexy-geek look staff whom he had ordered to pretend typically comprised of crayon-bright, to masturbate in front of him. The high-waisted skinny jeans worn with 41-year-old’s professional and personal a fuss-free bright T-shirt, a pair of heavy- reputation isn’t even on the line because rimmed glasses and a rebellious pout. at least three female employees have Metallic leggings, bright backpacks and filed sexual harassment lawsuits against skimpy 1980s running shorts completed him (all the cases were settled before the look. reaching trial); nor because he walks By 2008, it was a genuine fashion through his factory in his underpants sensation. At music gigs up and down and conducts meetings wearing just a the country, this exuberant youth-club thong — or a sock. The sock is not, one chic was unavoidable. should add, worn on his foot. Part of the label’s appeal was that it Instead, the fashion empire of this sat outside of fashion’s more prescriptive maverick Canadian entrepreneur — who trends, a sartorial law unto itself. apparently relishes his reputation as a The clothing is logo-free and mostly pervert and a libertine — has gone from unisex, so allowed the wearer to style being the coolest company on the block when it arrived in the UK in 2004 to the a unique look themselves — although, brink of bankruptcy because its auditor, no matter how creative the outfits, Deloitte & Touche, resigned last month they were always somehow distinctly after discovering “material weaknesses” American Apparel. As street-style blogs in the financial controls of the clothing proliferated, the trend was documented company dating back to last year. ad nauseam. For the exhibitionist Charney, In some respects, the brand became whose excesses are the stuff of fashion- a victim of its own success. Even if you industry legend, to be finally humbled ▲ The storefront of an American Apparel branch in lower Manhattan, New York, as seen earlier this month. didn’t subscribe wholeheartedly to the by accounts that are more street corner The stock of the trendy Los Angeles clothing maker and retailer fell to an all-time low of US$0.68 last look, the cheap logo-free jersey T-shirts than Wall Street is, some might think, a Wednesday as it scrambled to overhaul operations, boost sales and repair its faltering image. Photo: AFP filled a gap in most wardrobes. But the bit like Al Capone finally being brought ► Dov Charney, chairman and chief executive officer of American Apparel, stands for a portrait in a rest of the high street caught on quickly. to book over tax evasion. But whatever company retail store in New York on July 29. Photo: Bloomberg Uniqlo began selling cheap colored denim the catalyst, it has led to the unraveling and Gap stepped up its commitment to of an empire. It is a rags to riches — an eccentric, erratic, brilliant figure owns all its retail stores, rather than decent fitting, logo-free T-shirts. — and back to rags again — story that — with a disconcertingly simple concept: franchising them, and Charney — who Then, crucially, fashion overdosed has the fashion world in its thrall. to make humble T-shirts, jogging pants is obsessive about his brand, throwing on the look. Although there remains a Known for its cotton basics and sweatshirts seem exciting. tantrums about everything from stock hardcore band of youths committed to — including the infamous Y-fronts Charney cut his teeth in retail allocation to necklines — still holds, wearing their American Apparel brights so beloved of the founder himself while still at high school in Montreal, for the time being, a 53 percent stake. with ripped sheer tights, the look is — shares of the Los Angeles-based importing Hanes and Fruit of the Loom He explicitly resists being labeled as fading as fast as summer. Fashion is now company touched US$14 in 2008. That T-shirts from the US for his Canadian a manufacturing tycoon with a heart much more enamored with minimalism, same year, the London-based Guardian friends. He claims to have shipped of gold, or even a Jekyll and Hyde, camel and grown-up trends. Youthful newspaper named American Apparel around 10,000 shirts at a time in a rented happily admitting that he acts not for bright leggings are very much on the label of the year. Last year, Charney truck before, in 1990, dropping out of moral reasons but because it is a better sidelines, along with the company that was a finalist for Time’s 100 most Tufts University to pursue his business business strategy. made them its own. influential people in the world. full-time. Borrowing US$10,000 from his So what has gone wrong? Yet on Wednesday, his company’s father Morris Charney, an architect, the Fashionistas say the brand is still shares were trading at an all-time low 21-year-old moved to south California strong. “Just two years ago, American associate editor, has a theory. “I’ve breathtaking,” McCabe says. “That puts a retail analysts Planet Retail. Yet he of US$0.68 — a drop of almost 50 and began manufacturing T-shirts under Apparel was the ultra-fashionable shop bought lots from American Apparel lot of pressure on what their USP was in admits that the severity of Deloitte’s percent in less than a month. American the American Apparel brand. that you found in every cool location, in the past, but now it’s mainly their the first place, which was to be a trendy report, and the fact it then resigned as Apparel admits it now has debts of Six years later, the company was from Covent Garden to Oxford Street underpants I go back for. They do a niche brand. In addition, I feel the brand auditors of the clothing company, is a US$120 million and is losing money at unable to cover its debts and went to Shoreditch [all in London],” says lovely Y-front,” he says. “My problem has stood still. I see exactly the same “fairly cataclysmic” sign that, at best, a rate of nearly US$30 million a year. into administration. Charney, though, Melanie Rickey, Grazia’s fashion with the brand is that it’s a one-trick things in the Oxford Street store today leaves the business with only a “vague (As of press time the stock was trading was undaunted, and in 2003 founded editor-at-large. “It became very big, offering: You can’t see where they can as I did when I walked into their flagship form of future.” at US$0.76.) American Apparel in two stores in very quickly. Everybody was wearing it, take it. Calvin Klein has built an empire LA branch the week it launched.” “It sounds as if someone has blown With sales down by 16 percent in downtown Los Angeles, employing and I mean everyone: high-fashion kids, on pants, but he recreates his image The brand was once a neat proposi- a whistle about something less than its 279 shops globally, the company 1,300 people. Within a year, he was clubbers, geeks and gay kids across the and updates the design.” tion with a sexy, preppy image that hit palatable that’s going on,” Roberts whose clothes were worn by the coolest named Ernst & Young’s entrepreneur of world. It crossed all genres and tribes.” The other problem is Charney the fashion trends head-on and whose says. “That’s not to say anything illegal kids across the world is now at risk of the year and Apparel magazine’s man Interestingly, Rickey insists the himself. “He comes over as such a ethics were exactly right, McCabe adds. is taking place, but someone could breaching the terms of an US$80 million of the year. The legend was born. brand has not lost its edge: “No one sleazeball,” Johnston says. “Because Then came the recession, and the com- be transgressing best practice or loan provided by British company Lion The confusing thing about Charney does what they do in the way they do their campaigns are slightly grubby, pany found itself trapped in the limbo minimum requirements.” Capital, in March last year — a loan is his combination of out-of-control it: not Zara, not Topshop, and not H&M and he’s more than slightly grubby, it of the high end of the middle market. Charney has pinned the blame on a advanced to rescue it from another carnality and progressive social or Next,” she says. “I will personally be all conspires to be rather unappealing. “Why pay US$47 for a plain white T- police raid on its Los Angeles factory last financial crisis. If Lion Capital calls liberation. One industry insider calls really upset if American Apparel close The whole image of American Apparel shirt when you can pay less in Gap or year that found 1,500 illegal immigrants in its loan, American Apparel will be him an “odious character about whom their doors because it would be a great was supposed to be: ‘Aren’t we good, get a higher quality that will last longer working there — nearly a third of its forced into receivership. I have heard nothing but bad things, loss to our high street. I will be running making everything in the US and not by going slightly upmarket?” he asks. workforce. Charney was warned about Admittedly, Lion Capital may not be particularly concerning his recruitment to stock up on things they do really using sweatshop labor?’ Yet every American Apparel’s ethical USP has the raid by the authorities before it took an entirely gray-suited, sober company of techniques and the way he treats well, the classic items they do better story you hear about Dov himself is so also, it seems, rinsed out in the wash. place, and said he did all he could to get British investors. Just last week, Lyndon female employees.” There is, he adds, than anyone else on the high street. sleazy that all the goodwill their ethical “People have forgotten the ethics the papers from all his workers. He could do Lea, the son of a Lancashire, England, a “certain over-reliance on oral sex They will be hugely missed.” values should create is squandered. His company was built on, and so have nothing, he maintained, about the fact hairdresser and a founding partner of the during interviews over assessing their But not all fashion insiders agree, reputation would certainly make me forgotten why they should pay the pre- that so many turned out to be forged or private equity firm, was reported to have retail experience.” pointing to the brand’s failure to think twice before shopping there.” mium,” says McCabe. “Even if you start fake. Despite that, all the illegal workers held a no-expense-spared polo party at On the other hand, Charney is develop. The critics say that, for a Pearse McCabe, planning director to hammer that message home again, had to be fired and production suffered, his mansion in Montecito, California, passionate about liberalizing immigration company who took the humble T-shirt at global design consultancy Fitch, it’s too late: the retail market has been saddling the firm with more debts. with sushi being served off scantily clad policies, paying a fair wage, refusing to from basic item to fashion icon, to disagrees. “Dov’s image is part of green-ized. Everyone is trying to be It has left a toxic soup of women rather than plates. But for all that outsource manufacturing, and workers’ fail to catch on to this year’s hot look the DNA of the brand. It’s all about good, so it’s really hard for American contradictions. “What makes American Lion Capital might recognize a kindred rights. Virtually all of the company’s — the soft jersey cotton T-shirt — is the understated clothing, the sexy Apparel to stand out.” Apparel unique is the flamboyant spirit in Charnion has indicated it will manufacturing, distribution and retail is quite a lapse. communication style and him. It is, of course, far from the only nature of the man and the business,” remain supportive and is considering a done in-house in downtown Los Angeles, “They should have been very Consumers won’t refuse to go into the clothing company to hit hard times. A says Roberts. “He flies in the face of number of options, including relaxing by employees — the majority of whom successful,” says Lauren Stevenson, a stores because of him. I really don’t number of big, listed fashion retailers business sense, fashion manufacturing its loan to give American Apparel some are immigrants — who are paid more director at my-wardrobe.com. “There think that’s what this is about.” have seen similar declines in the past and retailing sense. There are plenty of breathing space. But if the investors than twice the minimum wage, offered has been a huge surge in the fashion American Apparel is teetering on and recovered. Last year, Abercrom- individuals in the US who would not change their mind and decide to cut their low-cost, full-family healthcare, and for T-shirts in the past three years. Our the edge of bankruptcy, says McCabe, bie & Fitch recorded a fourth-quarter be shedding tears over his individual losses, the jobs of 10,000 employees in allowed free international phone calls sales of luxury jersey brands are up by for a number of reasons — not least decrease of 23 percent, Saks showed demise — but those who campaign 20 countries will be at risk. during work hours. 430 percent against last year, while luxe its dramatic expansion: 150 stores in a 14.7 percent decrease, and Niemann to improve the working conditions It is a chaotic final chapter in the In 2008, Charney — founder of jerseys have increased by 450 percent.” its first three years and nearly twice Marcus 21.4 percent. of underprivileged employees and on story of a bombastic figure whose the largest manufacturer producing So why, in a market for basics that in the next three. The level of debt “It can happen to the best of immigrant rights, or who want to see out-of-control carnality has, at times, garments in the US — gave US$25 growing by that margin, have sales that expansion incurred is only now companies — look at Marks & manufacturing come back to America, overshadowed the fact that Charney is million of company shares to his in American Apparel declined by becoming clear. Spencer in the early 1990s,” says would be upset to see Charney’s also an old-fashioned captain of industry employees. American Apparel still 16 percent? Robert Johnston, GQ “The level of expansion has been Bryan Roberts, research director for business go down the pan.”