END OF AN ORIGINAL. American Apparel’s former employees and founder Dov Charney offer a no-punches-pulled retrospective on the twilight of the iconic retailer that won worldwide attention with pioneering styles, Made-in-the-USA production, and risqué marketing. By Christopher Ruvo

t’s late morning on a sunny Los Ange- American. Indeed, it’s no accident that the les weekday and this towering down- company is named American Apparel. town apparel factory is teeming with But this morning, typical of many at the life. Fabric cutters are slicing sheets factory, is in the past. It occurred in 2012. of material. Workers in turned-back After a reported $86 million loss in 2010, IDodgers caps are hustling, packing boxes things were seemingly on the up. The verti- with trendy hoodies. And on a sprawling cally integrated manufacturer of fashion open floor, legions of sewers are plying basics had just reported strong quarterly their trade, their machines drumming net sales. Certainly some company leaders stitches into place like a team of manic per- were buoyant, believing that greater reve- cussionists, creating T-shirts for everyone nue gains and sustained success were ahead. from urban hipsters to union teamsters. They were wrong. A gritty, hard-won vitality permeates Nearly five years after that bustling the space. The energy is palpable in the morning, in January of 2017, American hum of machines and the dexterity of fast- Apparel ended up on the auction block working hands. It’s a force felt, too, in the following multiple bankruptcies, the oust- snippets of talk among workers, who add ing of controversial founder Dov Charney, first languages from around the globe to the alleged dubious maneuverings from lend- rhythmic pulse of manufacturing. In their ers, and the installation of a new executive labor, their teamwork that spans a spec- team that was unable to save the company. Counselor named Dov trum of cultural backgrounds, in the sheer In February, Montreal-based apparel Charney its person of manufacturing force they help propel, maker Gildan (asi/56842) completed the the year in 2004. there radiates an essence that’s profoundly purchase of American Apparel’s intellectual

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property rights, some wholesale merchandise was an attractive and universally appealing in a city – all that made it challenging to and some equipment, but not its production brand name,” says Mark A. Cohen, director generate the necessary sales levels. The facilities or retail stores. While not Gildan’s of retail studies at Columbia University’s challenge was exacerbated by agile retail- fault, the deal sealed the fate of the remain- Graduate School of Business. “But the ers like H&M, which competed successfully ing Los Angeles factory workers – and many fundamentals of the business were unsus- for market share with their fast-fashion others employed by the company. Unemploy- tainable, and the notoriety of the founder business models that offered inexpen- ment had been looming; now it came. became more than the business could bear. sive trendy clothes to the same youthful Today, American Apparel’s factory has The thing became a train wreck.” demographic American Apparel courted. fallen silent. The sun still wins its struggle Both analysts and certain former “With all this competition you had to deal with the industrial windows, pushing employees, though not Charney, say Ameri- with, the productivity of those (American SoCal rays across the floor, but there are no can Apparel’s problems began back when Apparel) stores dropped,” Peter Lynch, a American Apparel workers there to appre- the company was seemingly moving from partner at A&G Realty Partners, told The ciate the light. Only memories hold sway. strength to strength, growing rapidly and a Los Angeles Times earlier this year. darling must-have label for millennials. And when productivity dropped, debt The Debt Millstone To capitalize on the energy around the increased – and increased. The higher The big question: How did it come to this brand, American Apparel rapidly expanded cost of U.S. manufacturing compounded for American Apparel? its retail presence. The first stores launched the debt travails, in the view of Cohen and To be clear, the brand itself is still alive, in 2003. Over the next several years, Ameri- other analysts. “The real story of what hap- planning big things and available to pro- can Apparel exploded into a chain with 140 pened with American Apparel is that Dov motional products distributors through locations in 11 countries. Fast-forward to ran up millions of dollars in debt,” says American Apparel once employed nearly 5,000 people in its 800,000-square-foot LA factory. Gildan (see sidebar on page 49). Going 2009, and there were more than 280 stores another former top-level employee who forward, Gildan says it’s enthusiastic about “American in operation. Charney had even proclaimed spoke on condition of anonymity. We’re difficult for him.” Adds Dave: “It was pain- Ironically, American Apparel’s down- building upon some of the best aspects of that the expansion was the “fastest retail calling him Dave. “That was very hard to get ful to see from the inside. You could feel fall as a company could also have been American Apparel’s legacy, including inno- Apparel failed roll-out in American history.” out from under.” that the ship was sinking.” hastened by what for a long time was a vative styles and hip appeal. Gildan believes Too fast, says one former leadership level Charney has dismissed claims that retail significant strength: the raw, unvarnished, that, with some work, the American for one reason: employee who asked to remain anonymous. stores were underperforming or burdening Mismanagement & sexually-charged aesthetic of its market- Apparel name can recapture its once wide- “If you look at the early days of the retail the business, saying most were profitable Branding Backlash ing – an aesthetic, says Dave, that became spread appeal. “We’re excited about taking Corruption.” period…would any business class you’d take prior to his 2014 removal. The U.S manu- Still, the storm of debt wasn’t the only increasingly repellant when associated in this brand and making it a leader again,” Dov Charney in college advocate opening that many stores facturing model was viable and strong, too, impediment that kept American Apparel the popular consciousness with accusations says Garry Bell, Gildan’s VP of corporate around the world so quickly?” says the he says. Nonetheless, the company started from reaching safe harbor. Dave and Dar- that Charney engaged in sexual harassment marketing and communications. ican Apparel employees who were there employee we’re calling Darren. “Stores were taking on debt in 2009, he has maintained, to ren concur that the company’s organiza- and other alleged sordid behavior. But while the American Apparel brand for the company’s meteoric rise and bruis- going up left and right. The rents were high. address a productivity decline and the need tional structure didn’t help maximize what Dave says American Apparel’s market- lives, the business that was a global-retail- ing tumble back down the mountain. The We weren’t going into cheap places. We had for hiring and training new skilled work- it could achieve. “It was run like a shoot- ing should be credited for spearheading “an ing, vertically integrated apparel manu- picture that emerges is a Jackson Pollock about 15 stores in Manhattan alone at one ers following an immigration investigation from-the-hip start up,” says Dave. “Instead alternative idea of beauty” in the fashion facturer – an organization that had called – a complex swirl of different factors that point. You couldn’t get off a subway without that resulted in American Apparel having to of a pyramid-like traditional structure, Dov world – one where real people from the itself a one-company industrial revolution contributed to the ultimate demise. Still, a seeing an American Apparel, went the joke. release more than 1,500 employees. built this completely horizontal edifice with brand’s target demographic were presented – is dead. How did that happen to a busi- number of key elements – all intertwined With all this, there became a huge nut you There was no doubt that American like 200 direct reports. It was run insanely.” in unapologetically natural looks. “We were ness that pioneered fashion basics, that had – appear to rise from the whirling muddle. had to crack every month. The financial Apparel was dealing with debt. And getting While not as critical as Dave, Darren says doing Instagram 10 years before there was a worldwide retail presence, that led the They include overzealous retail expansion, need was just enormous.” that debt monkey off the company’s back that a clearer, more orderly structure could Instagram,” says Dave. “It had a huge part way in USA-made apparel production, that lack of effective brand and product evolu- Certain analysts agree with Darren’s was a trick that couldn’t quite be conjured, have been beneficial. in growing the brand.” won praise for the above-average wages it tion, changing marketplace trends, opera- assessment. While the retail store blitz was says Darren. “We did hope things would Paula Rosenblum, a managing partner And sure, the live current of overt sexu- provided, that cultivated a world-famous tional and organizational shortcomings, fundamental to turning American Apparel break and that we would start to pay down at Retail Systems Research, believes other ality coursing through the imagery, some- hip image through risqué marketing, and crushing debt, potentially the alleged bad- into a global brand, it eventually became the debt, but there was a lot,” he says. “Dov missteps by management hurt the company times criticized as pornography, helped that ranked among Counselor’s Top 40 faith actions of lenders, and a founder whose a millstone saddling the company with an put every penny he had into this thing. It too, both before and after Charney’s time. electrify the appeal – at least initially. largest suppliers in the North American salacious controversies came to overshadow ever-increasing debt, they say. The rapid was his heart and soul. He could always find “This was a business that begged for end- “When American Apparel came out, there promo products industry year after year? the brand, triggering backlash. expansion, the positioning of stores in rent- a way to come up with more cash. But he less aisle retailing,” says Rosenblum. “They was a hunger for unpolitically correct, racy For answers, Counselor talked to Char- “For a while, everything about the expensive spots, putting too many simi- went to the well too many times – agreed to probably should have done something dif- stuff,” says Dave. “The sexual element hit ney, distributors, analysts and former Amer- American Apparel story was appealing. It larly-merchandised stores close together things where he lost power. It became very ferent distribution-wise as well.” a nice note. But it was also a deal with the

1989/90: 1997: After 2000: 2003: 2005: 2005: Several 2006: 2009: American 2011: 2012: Net sales 2013: June 2014: Sept. Dec. 2014: Oct. 2015: Autumn 2016: Nov. 2016: Jan. 2017: Feb. 2017: While an operating in South American American Inc. ranks former employees American Apparel receives an Following an rise a reported American American 2014: American American Schneider American Gildan wins Gildan completes AMERICAN undergrad at Carolina and learning Apparel Apparel opens American Apparel sue Charney for Apparel agrees $80-million infusion $86 million 13% over 2011. Apparel Apparel’s Luttrell Apparel Apparel files resigns as Apparel files a bankruptcy the $88 million Tufts Univer- from apparel industry moves into its first retail at 218 on its list sexual harass- to a deal with from British investment loss in 2010, In the North refinances board resigns. fires for bankruptcy, CEO. Chelsea for Chapter auction for acquisition of APPAREL: sity in Mas- veterans there for the downtown stores, with of the 500 fastest- ment – charges Endeavor Ac- firm Lion Capital to pay a group of American promo secured removes Scott Charney, listing $199.3 Grayson, 11 bankruptcy American American Apparel’s sachusetts, a time, Charney Los Angeles locations in growing private he then says are quisition Corp. off debt. Also, after a Canadian in- products market debt in Charney as Brubaker who had million in assets American and enters into Apparel after intellectual property Canadian relocates to Los location that LA, Montreal companies in the false. In the years that effectively government inspection vestors agrees in particular, rev- an effort CEO. Chief becomes been and $397.6 mil- Apparel’s a proposed raising its bid rights, some whole- A TIMELINE Dov Charney Angeles. Charney is to serve as and New York. nation on the ahead, Charney allows the reveals that 1,600 of its to provide up enue increases to gain Financial interim appointed as lion in debt. The general agreement to to $88 million. sale merchandise begins a later partners with its manufac- In the coming strength of a will be the subject clothing maker workers do not appear to $45 million 7.3% to nearly greater Officer CEO. a company NYSE suspends counsel and be acquired and some manufac- T-shirt ven- Sam Kim and Sang turing center years, retail reported 525% of additional suits to list shares to be authorized to work to American $97 million. Yet, financial John consultant. trading of the chief adminis- by Gildan turing equipment. ture that will Ho Lim, both of and company locations three-year growth and accusations on a stock ex- in the U.S., American Apparel, the company strength. Luttrell Paula company’s stock trative officer, Activewear for Gildan plans to make grow into whom eventually headquarters proliferate trend and $127.9 related to change without Apparel terminates reportedly reports a net Net losses is named Schneider is and begins takes over $66 million. the brand a leader American sell their stakes for years to globally. million in reported alleged sexual doing a public about 1,500 employees. to help avoid loss for the year increase. as interim named CEO. the process of the chief again in fashion Apparel. in the company. come. 2004 revenue. misconduct. offering. bankruptcy. of $37.3 million. CEO. delisting AA. executive post. basics.

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Marketing Genius or devil. It got us attention, but at the same his client were “completely false.” American in a way that allowed it to solidify the lead- time, it was a one-liner that would eventu- Apparel’s management was “desperately try- ership position it once held. What’s Next for American Apparel Simply Sleaze? ally get tired. And it did.” ing to distort public attention to the fact that “No doubt they were pioneers with fash- Tastes started to change, and American Mr. Charney’s firing was illegal. They went ion tees and the like, but they didn’t own it American Apparel is not only still alive – age of total sales,” says Bell. Distributors can American Apparel’s suggestive ads were it’s gearing up to be an industry leader again. buy American Apparel through authorized both a blessing and a curse for the brand. Apparel failed to evolve its aesthetic to through years and years of private text mes- – didn’t maintain their dominant position continue captivating core audiences, says sages from his personal telephone between and completely control the market,” says Gildan Activewear (asi/56842) is keen to dealers like TSC Apparel (asi/90518) and Dave. Combine that with the fact that the himself and his friends, some of which Ziskind, COO at Top 40 distributor Cali- communicate that message to the promo- www.americanapparelwholesale.com, where company founder was the subject of legal involved amorous conversations that were endo Savio Enterprises (CSE, asi/155807). tional products industry. more information about purchasing and actions related to alleged sexual harassment consensual and welcome in nature.” “You had viable alternatives in the same Even so, VP of Corporate Marketing/Com- inventory is available. munications Garry Bell admits 2017 will be a Additionally, Gildan has opened a Los and other accusations of skeevy behavior, Regardless, with all the smoke around categories come into play, and those alter- transition year as Gildan works to overcome Angeles-based merchandising and marketing and the sexuality of the marketing content Charney’s image and alleged actions, con- natives were backed by distribution models a variety of challenges, such as inventory office with former American Apparel employ- spurred a backlash, Dave maintains. “The sumers saw fire and became increasingly that were friendlier to our industry. They levels that were inherited when it bought ees to “ensure we keep the core DNA of the brand had finite appeal and was over,” he turned off to American Apparel and its sex- lost their point of differentiation, the value- American Apparel out of bankruptcy. “2018 is brand from a design, marketing and creative says. Rosenblum agrees: “The sexy vibe – ualized marketing, according to Dave. That added services were not there, and they when you’re really going point of view,” says Bell. that was just done. That was gone. That was hurt sales. “The stuff made us repugnant,” became obsolete.” to see the added value Still, Gildan could not fun anymore. Couple that with some of he says. Meanwhile, distributors like Howard that Gildan will bring to have some convinc- the things Charney was supposedly doing Beyond failing to progress past what Potter say inadequate clothing quality and the brand,” he says. ing to do in the promo and you get a real creepy factor.” may have been an increasingly problematic sizing options, along with shoddy service, Still, Bell notes that American Apparel items products industry. Given the turmoil of recent It would seem the allegations of sexual image, inadequate evolution could have led him to stop doing business with Ameri- are currently for sale to distributors, while add- years and the change in ownership, some misconduct that Charney faced – dating hurt American Apparel on the product side can Apparel several years ago. “The stock ing that there are other exciting things already distributors say they’re taking a wait-and-see back until at least 2005 – didn’t help matters too, former employees and analysts say. was always off, their stuff always shrank happening. Gildan has secured U.S-based approach to the new American Apparel. “As a for American Apparel in the court of public Styles went stale and weren’t reinvigorated. during the screen printing process, the contractors to make fabrics and sew garments distributor, I need to know I can rely on them opinion. Perhaps the most notorious was the Over time, Dave says the company strayed sizing was really narrow, and they didn’t for key American Apparel styles offered to the and I’m not there quite yet,” says Josh Ebra- case of Irene Morales, who sought $260 mil- too far from creating new innovations in understand their own product,” says Potter, wholesale market. In addition, Gildan is leverag- hemi, partner at Jack Nadel International lion and alleged that Charney locked her in fashion basics – the lifeblood of what had CEO of A&P Master Images (asi/102019). “I ing its global manufacturing capabilities to pro- (asi/279600). his apartment as a “sex slave.” The suit was made American Apparel great. “Resources don’t think I was the only one dealing with duce certain American Apparel styles abroad, Gildan aims to restore the faith. “We settled for $1.56 million based on a finding were put into making fast-fashion stuff that those issues.” creating less expensive offerings it believes will believe,” Bell says, “that with our manufactur- that Charney supported the setting up of a was not in line with the core of the com- Still, other distributors sing an entirely be able to compete better for the business of ing and operational expertise we can amplify blog that impersonated Morales. pany,” he says. “They started making slutty different tune. While admitting fit could price-conscious end-buyers. American Apparel’s strengths and help the In a 2015 filing, American Apparel said stripper wear, preppy clothes, sweatpants. sometimes be inconsistent, Harry Ein says “We expect Made-in-the-USA styles to brand retake its leadership position as a fash- continue to represent a significant percent- ion basics innovator.” two other sexual harassment claims by It just got more bizarre.” that American Apparel was a boon to his ex-employees were settled for confiden- Sahir Anand sees merit in the argument business. The owner of Perfection Promo, an tial amounts. Another female employee that American Apparel got stuck and lost affiliate of Top 40 distributor iPROMOTEu pany, Ein and Ebrahemi say the supplier’s In December of the same year, after an received $1.82 million based on Charney’s its way. “You need to keep reinventing your (asi/232119), says the brand offered a cut- distribution model and service met their investigation Charney says was a sham, the alleged failure to intervene in the estab- story, constantly evolving your brand,” says ting-edge image, robust urban retail pres- needs. “I have nothing but good things to board fired the founder from his role as a lishment of a blog that impersonated her. Anand, a vice president at EKN Research, ence, and fair wholesale pricing that helped say about working with American Apparel,” consultant (Charney vigorously asserts Through September 2014, lawsuits against an advisory firm that focuses on consumer him earn scores of sales. He had particular says Ein. “They were a partner. They were that sexual harassment was not one of the Charney totaled $8.2 million in insured liti- industries, including retail. “You have to success with clients targeting fashion- based in the U.S. and I believed in that mis- reasons for his firing). gation costs and $1.2 million in uninsured track your evolution and keep redefining forward end-users – clients like technology sion of domestic production. I thought they Following Charney’s final removal, the litigation costs, according to the American how you enter the market space. They don’t companies in the San Francisco area where had a good brand, a good product. I’m sorry board hired veteran fashion executive Apparel filing. appear to have done that effectively.” he resides. “When I could offer them an for the troubles that they ran into.” Paula Schneider as CEO. To lead the hoped- Other allegations against Charney American Apparel might also have been American Apparel shirt with their logo on it for turnaround, Schneider brought in other include that he physically and verbally wounded by neglecting to adapt quickly for less than what they were accustomed to The Final Descent new executives – a team under which the abused workers, sent sexually explicit texts enough to web-based buying trends. seeing it for at the store, that became a very Despite those troubles, some longtime culture at American Apparel shifted 180 and emails to staffers, and that he used an According to a court filing, the company easy sale,” says Ein, noting he did $90,000 employees believe that American Apparel degrees. “They sucked the life out of the American Apparel computer and network was consistently earning about 11% of its worth of business (net sales directly to could have overcome the obstacles and place,” says Honda. “It was a fun, young, server to save images and videos of himself revenue through online sales. That report- American Apparel) with the supplier in just would still be in business today as a creative culture where you knew people engaged in sexual activity with employees edly compared to 20% for competitors. a few years’ time. retailer/manufacturer had it not been for would inspire you. But then they came in and models. Rosenblum doesn’t buy those numbers, Josh Ebrahemi tells a similar story. lenders who didn’t have the business’ best and built themselves these beautiful offices For his part, Charney has long-asserted but does maintain that American Apparel Praising American Apparel styles, cuts, interests at heart and the imposition of new and locked themselves in behind security that any sexual activity that he did engage should have grown to be omnichannel, pro- quality and appeal to a range of clients, the executives that, they allege, were ill-suited doors. The open-door policy was gone. in was consensual. He has characterized viding a seamless experience for consumers partner at Top 40 distributor Jack Nadel to direct the company. “I think if Dov had They created a corporate environment. It himself as a target of extortion attempts across digital platforms and physical stores. International (asi/279600) says he would continued on, the company would not be in didn’t work for our business.” by people intent on exploiting his “trans- “Mistakes were made,” says Darren. use American Apparel as a kind of barom- the position it’s in today,” says Pat Honda, Perhaps even more fundamentally, says parent persona,” and as a victim of a eter to gauge a buyer’s taste and budget. who worked in American Apparel’s whole- Darren, at least some executives failed smear campaign aimed at discrediting Distributors’ Take “I would literally say to clients something sale division from 2001 to 2015, serving as to adequately comprehend American him. “There has been a lot of spin,” he told From a promo distributor perspective, like, ‘Are you looking more for a typical director and later president. Apparel, from its operations and facilities Counselor. “I deny all allegations.” Mark Ziskind taps into a theme related to promo shirt or something of American In June of 2014, the company’s board to its audience, markets and the apparel At the time of American Apparel’s filing in inadequate progression to partially explain Apparel quality?’” Ebrahemi says. of directors ousted Charney from his itself. “They had degrees and experience, 2015, Charney’s lawyer Keith Fink said in an American Apparel’s decline, saying that the Until American Apparel’s final days as a CEO position for alleged misconduct and but they didn’t understand the business,” email to BuzzFeed that allegations against company didn’t advance its styles or service vertically integrated manufacturing com- purported violations of company policy. Darren says.

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While Cohen and Rosenblum criticized American Apparel's Promo Product Sales Growth Charney’s work as an executive, both lauded him as being an ingenious merchant 8 2012: Promo – something Rosenblum says Schneider sales reach 7.3% 7 $97 million was not. “She was an operator, not a mer- 6.0% 6 June 2014: chant,” Rosenblum says. “She was there Charney ousted to tidy up the financials. I felt they needed 5 as CEO another merchant to capitalize on the 4 opportunities that were out there.” 3.4% While Schneider did not respond to 3 2.5% an interview request from Counselor, she 2 2.6% spoke at Fortune’s Most Powerful Women 1 1.1% Summit 2016 about her time at American 0 March 2009: Apparel. She maintained that she had Lion Capital invests “every intention of succeeding” and that -1 $80 million in American Apparel -1.6% with enough time and money “we would -2 have succeeded.” Saying she had a strong, -3 -3.2% highly capable team in place, she professed -4 October 2015: that her intention was to keep American American Apparel -5 files for bankruptcy Paula Schneider was named CEO of American Apparel in December of 2014. Her last In 2015, angered over furloughs, some American Apparel workers bashed a piñata Apparel’s manufacturing in the U.S. while day on the job was October 3, 2016. with the likeness of CEO Paula Schneider, who replaced Dov Charney. turning the brand into a powerhouse again. -6 -6.1% -6.3% Additionally, Schneider said that the -7 bankruptcy as was promised, the lenders Ultimately, the company couldn’t refinance Main Street to Wall Street,” says Charney. obstacles she inherited on her first day were 2006200720082009201020112012201320142015 really intended to swiftly sell the company its future, and it collapsed.” Further, he added, the investigation that monumental, from slow-moving inven- to make a “quick profit at a premium price.” led to misconduct charges and his firing tory to the legacy of hundreds of millions in When that didn’t happen, the lenders looked Defiant But Forward-Looking was a bogus kangaroo court. “My oppo- losses over the previous five years to having and demonstrations, with some professing heavy heart, I’ve come to the conclusion it for another buyer and allegedly loaded up It’s another sunny weekday morning in nents spent millions in trying to distort the not turned a profit since 2009. “It looked loyalty to Charney, believing he would not is time for me to resign as CEO.” the debt as American Apparel lost money. LA, but Charney’s mood doesn’t match truth,” Charney says. as though we were going to hit the rocks by have allowed layoffs to occur. Outside com- In November of 2016, American Apparel “The lender committee did not pursue any the weather. He seethes as he talks about While still incensed about American April,” says Schneider, who officially began pany headquarters, workers even bashed a again filed for Chapter 11 bankruptcy and operational or transactional solution to the fate of American Apparel from the LA Apparel, Charney is also excited about the as CEO in January of 2015. “I pulled every piñata with the likeness of Schneider, who entered into a proposed agreement to be the company’s financial woes other than to headquarters of his new clothing company, future of Los Angeles Apparel – a company single lever I could to save money.” said she also received a death threat in the acquired by Gildan. attempt to find a new purchaser for the com- Los Angeles Apparel. For him, it’s unequivo- he founded last year. Honda, who is help- One of those levers included “furloughs.” form of a picture of a corpse that looked like pany,” Standard General claimed. Says Dar- cal what brought down the company he ing spearhead the fresh venture, says the The layoffs hit the American Apparel work- her. Darren says security guards with dogs “The Venture Capitalists ren: “The venture capitalists smelled blood.” founded: backstabbing by lenders and the business employs 300 former American force hard. “Morale was low,” says Honda, were brought in – a move that only served Smelled Blood” Interestingly, the suit also revealed that company board. “American Apparel failed Apparel production workers. Made-in- who was dismissed, she claims, on the heels to escalate animosities in his view. “I was While Gildan closed the deal in early 2017, the turnaround plan for American Apparel for one reason: corruption,” he says. “Forces the-USA, the line will feature classic basic of engineering an approximately $17 million literally trying to save 9,000 jobs and save a that didn’t end the saga surrounding Amer- was to include exiting the dyeing and knit- on Wall Street illegally hijacked a com- styles that helped make American Apparel month in wholesale sales – a firing she alleges company that had been troubled for years,” ican Apparel’s demise as a manufacturing/ ting operations in California and moving pany to enrich themselves – and then they a household name, as well as new innova- was part of a concerted effort by manage- says Schneider. retail company. In January, a lawsuit filed production from Los Angeles to the south- crashed it.” tive cuts, styles and colors, Charney says. ment to rid the company of people who had Nonetheless, American Apparel filed by hedge-fund investor Standard General eastern U.S. Defiant and passionate, Charney dis- Top 40 supplier TSC Apparel (asi/90518) been close to Charney. “On Thursdays and for bankruptcy in 2015. Some, like Darren, shed possible additional light on what Standard General filed the suit in U.S. putes what he says are inaccurate media has entered into a partnership with Los Fridays, they would let teams go. It made for believe that the emergence from bankruptcy Charney and others assert was a primary Bankruptcy Court in Delaware, naming narratives about the company’s downfall, Angeles Apparel to carry the line in the pro- agonizing anxiety at the end of each week.” was mishandled, accelerating the company’s cause of the shuttering: alleged perfidious lenders that include Monarch Master calling them “fake news.” While public doc- motional products industry. Los Angeles That anxiety translated into worker anger tailspin toward nonexistence. He feels many dealings by lenders. Funding Ltd., Coliseum Capital Partners uments show that American Apparel expe- Apparel operates in the wholesale market, more retail stores should have been closed A former American Apparel shareholder L.P., Blackwell Partners LLC, Goldman rienced losses and sales declines, Charney but could eventually expand to retail. “I than actually were, among other decisions and member of the lender committee that Sachs, and Pentwater. The named parties maintains that American Apparel produced think we’re going to inspire the next 10 years that left him scratching his head. “I actually held more than 90% equity in the com- deny any wrongdoing and filed motions to EBITDA profitability under his leadership. of T-shirt making,” says Charney. thought, ‘Are they trying to bankrupt the pany, Standard General sued other lending dismiss the case. At press time, hearings “That’s the way to value a business,” he Darren is not part of Los Angeles company for good?’” says Darren. committee members that bailed American were ongoing and no rulings were issued. says. “We were meeting target profitability Apparel. He has moved on to another About a year after American Apparel Apparel out of its first bankruptcy in 2015. Considering the lawsuit from an indepen- goals on an EBITDA basis.” job. It’s a good gig, but it’s not American filed for bankruptcy, Schneider resigned as Standard General claimed the other lenders dent perspective, Cohen says it’s difficult to Proclaiming that the American Apparel Apparel. Nothing could ever really com- CEO effective October 3, 2016. The resig- saddled the company with $82 million in say if the allegations against the lending com- brand remained powerful, Charney says pare to the energy, vibrancy and creativ- nation came about a month after American additional debt between April and October mittee will hold water. Do financial players that he was “double-crossed” by the board ity of American Apparel at its height, says Apparel had hired a global investment bank of 2016 while seeking a buyer for the busi- sometimes prefer failure or a quick sale to a and lenders intent on getting him out of Darren, his voice inflected with a trace of to explore a sale of the company. In her res- ness. Imposed without informing Standard company’s reemergence so they can realize the way. Legal battles related to the tangle nostalgia. “It was an incredible experi- ignation letter, Schneider wrote that “the General, the terms of the loans empowered a profitable gain? Of course, he says. Is that of allegations remained as of press time. ence,” he says. “It was amazing to be part of sale process currently underway for all or the lenders to overtake Standard General what happened with American Apparel? “I “They not only betrayed the shareholders something that for a while had such a great part of the company may not enable us to in American Apparel’s capital hierarchy, don’t know if anyone other than the lenders and the founder, they betrayed the commu- growing story. It was a story the world was pursue the course of action necessary for according to the suit. knows what their intentions were,” he says. nity, the Made-in-the-United-States move- seeing and hearing. I’ll probably never have the (turnaround) plan to succeed nor allow What’s more, Standard General claimed “I think you have to presume they wanted ment, and they betrayed 5,000 workers in that type of experience again.” At its height, American Apparel had more than 280 stores the brand to stay true to its ideals. There- that, rather than trying to reinvigorate the company to be successful again. At the Los Angeles and 10,000 worldwide. This – Email: [email protected]; around the world. Today, all of them are shuttered. fore, after much deliberation, and with a American Apparel after the October 2015 end of the day, we don’t know what went on. was a largescale transfer of wealth from Twitter: @ChrisR_ASI

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