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 44 JULY 2017 | COUNSELOR COUNSELOR | JULY 2017 45 Cover Story 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.