American Apparel
American Apparel Inc. is an online-only retailer and former brick-and-mortar stores operator based in Los Angeles, California. Founded by Canadian businessman Dov Charney in 1989, it was a vertically integrated company that ranked as one of the largest apparel manufacturers and marketers in North America.
After losing money for six consecutive years, American Apparel filed for Chapter 11 bankruptcy in the U.S. on October 5, 2015 in the United States Bankruptcy Court for the Central District of California. It was reported that the brand then agreed to a plan with its creditors to convert $200 million of debt into equity, $90 million in debtor financing and $70 million in new capital. The company officially exited bankruptcy after its financial restructuring plan was accepted by the Bankruptcy Court in Delaware and became privately owned by its creditors and bond holders, thus severing ties with all former stockholders as well as ex-CEO and founder Dov Charney. In January 2017, Gildan Activewear purchased American Apparel's intellectual property and other assets for $88 million in a bankruptcy auction after the company filed for bankruptcy a second time in November 2016.
In January 2017, American Apparel laid off 2,400 Southern California workers and started the process of shutting down company factories and closing its 110 stores, using Chapter 7-like tactics.
As of mid-2017, American Apparel runs as an online-only retailer and markets itself as "Ethically Made—Sweatshop Free," with the majority of its products being made internationally. Most of its apparel is sourced from factories in Central America, primarily Honduras and Nicaragua.
In January 2018, the company had an executive board consisting entirely of women.
History
American Apparel was founded in 1989 by Canadian Dov Charney.In 1997, after a variety of iterations, including a period of manufacturing in South Carolina, the company moved to Los Angeles. Charney began to sub-contract sewing with Sam Lim who, at the time, had a shop with 50 workers under the Interstate 10 freeway in east LA. Months later the two became partners. In 2000 American Apparel moved into its current factory in downtown Los Angeles where it continued to grow primarily as a wholesale business, selling blank T-shirts to screenprinters, uniform companies and fashion brands. After its experience as a wholesale brand, the company moved into the retail market. The company was ranked 308th in Inc.'s 2005 list of the 500 fastest growing companies in the United States, with a 440% three-year growth and revenues in 2005 of over US$211 million.
In late 2006, American Apparel went through a reverse merger and became listed on the American Stock Exchange.
It is also one of the few clothing companies exporting "Made in the USA" goods and in 2007 sold about $125 million of domestically manufactured clothing outside of America. The company promotes labor policies that exclude use of clothing manufactured in sweatshops.
In 2010, American Apparel's auditors, Deloitte & Touche, resigned after informing the company that its financial statements for 2009 may not be reliable. The resignation led to investigation by U.S. Securities and Exchange Commission and the United States attorney's office for the Southern District of New York.
In April 2011, American Apparel confirmed that it had secured $14.9 million in financing from a group of Canadian investors. Under the deal announced, American Apparel sold some 15.8 million shares of common stock at 90 cents a share to a group of investors led by and Delavaco Capital. The investors also received warrants to buy as much as 27.4 million additional shares.
In April 2013, American Apparel issued a private offering of $206 million in senior secured notes. The proceeds were used to repay a long-standing, high-interest credit facility from Lion Capital and Crystal Financial.
In June 2014, the Board of Directors decided to oust American Apparel founder, chairman and CEO, Dov Charney, after allegations of misconduct and inappropriate behaviour towards employees. As interim chief executive during the search for a permanent CEO, the company's CFO John Luttrell was appointed. As co-chairmen the company appointed Allan Mayer and David Danziger. Charney, through his lawyers, claimed his ousting was illegal and demanded reinstatement. Soon after, Lion Capital demanded the repayment of a $10 million loan four years early. A failure to repay the loan would trigger a default on a $50 million credit line with Capital One Financial.
In December 2014, American Apparel announced the official termination of CEO Dov Charney and the promotion of fashion executive Paula Schneider to that position.
As of September 2015, American Apparel was trying hard to avoid bankruptcy as it scrambled to raise money to pay down US$15.4 million debt due in October, 2015. It was struggling to find funds as it prepared to report a torrid set of financial results in the coming weeks.
The clothes retailer warned investors in August 2015 that it would not have enough cash to "sustain operations for the next twelve months" which raises "substantial doubt that we may be able to continue as a going concern". The firm filed for Chapter 11 bankruptcy on October 5, 2015. In January 2016, the brand rejected a $300 million takeover bid from Hagan Capital Group and Silver Creek. The investment firms are supporters of Dov Charney.
In January 2017, American Apparel was acquired at auction for $88 million by Gildan Activewear, a Canadian sportswear company.
Montreal-based company Gildan Activewear Inc. bought American Apparel but not its physical stores.
Branding and advertising
American Apparel designs, creates and prints its own advertisements. The company is known for its provocative and controversial advertising campaigns, which is largely the inspiration of the company CEO Dov Charney. According to Adage, American Apparel's advertising 'telegraphs the brand' from person to person. Their print campaigns are widely considered to be some of the best in the industry. The sexually charged advertising has been criticized, but has also been lauded for honesty and lack of airbrushing.According to CEO Dov Charney, the vision for the brand is that of a "heritage brand. It's like liberty, property, pursuit of happiness for every man worldwide. That's my America." In regards to the company's image overseas, advisor Harry Parnass stated that the brand is about aspiration and that they are "selling the American dream."
American Apparel images often display subjects with their blemishes, imperfections and asymmetrical features highlighted and attached with brief, personal descriptions. Many of the models in American Apparel's advertising are recruited by Charney and his colleagues on the street, or company stores; others are selected after sending their photos directly to the company website.
The company has also used pornographic actors and glamour models in some of its ads including Lauren Phoenix, Charlotte Stokely, Sasha Grey, Euguenia Diyordiychuk and Faye Reagan. Adult entertainment trade magazine Adult Video News cited the American Apparel website as "one of the finer softcore websites going". Some of the company's other ads, which feature nudity or sexual themes, have been banned by various advertising authorities. In 2009, an American Apparel ad which appeared in VICE Magazine was banned in the UK, because the image "could be seen to sexualise a model who appears to be a child". American Apparel complied with this ruling. American Apparel also came under fire for a 2014 ad for mini-skirts, which featured a model bending over so that her underwear was prominently exposed. In 2013, the company released an ad in which the model lay on a bed with her feet up in the air without wearing pants. The company also released an ad in which a model posed in a series of photos focused on her crotch, in which her face was not seen. The UK Advertising Standards Authority criticized the ad for being "voyeuristic" and "vulnerable".
For a time, Charney used a branding strategy that spotlighted his treatment of workers, promoting American Apparel's goods as "sweatshop free". In 2014, the company released a controversial ad with a topless model, and the words "Made in Bangladesh" across her chest, in an effort to draw attention to the company's fair labor practices. In 2008, the company took out a series of political ads featuring the corporate logo that called current immigration laws an "apartheid system".
In 2005, the company was named "Marketer of the Year" at the first-ever LA Fashion Awards. Women's Wear Daily published a survey in April 2007 from Outlaw Consulting, a creative research firm tracking the habits of 21- to 27-year-olds, which ranked American Apparel as the 8th most trusted brand, ahead of such clothing brands as H&M and Levi's.
In 2007, Imp Kerr created a fake American Apparel ad campaign in New York. The stunt lasted almost a year, until it was revealed that the fake ads were actually Photoshop mockups. American Apparel ran a tribute ad on the back cover of Vice magazine showing a compilation of the fake ads.
In January 2008, the Intelligence Group, a trend and market research firm, listed American Apparel as their number two Top Trendsetting Brand, behind only Nike. In 2008, The Guardian named American Apparel "Label of the Year".
From 2009 until 2014, photographers such as Henrik Purienne and David Shama worked on a number of ad campaigns for American Apparel that defined the identity of the brand.
Woody Allen billboard and lawsuit
In 2007, American Apparel put up two billboards, one in New York and one in Los Angeles, featuring an image of Woody Allen's character dressed as a Rabbi from the movie Annie Hall and Yiddish text, for a period of one week. According to Charney, the billboards were a satire and allegory alluding to both the scene in the movie and the similar controversy experienced by both individuals. Allen strongly objected to this use of his image and sued the company for $10 million. Allen testified at a December 2008 deposition that he considered the company's advertising to be "sleazy" and "infantile".Although the company said as early as May 2008 that the billboards were meant "strictly as social parody", there was much debate over whether American Apparel's lawyers would use Allen's personal life, namely his affair with Soon-Yi Previn as their defense at the trial. Charney claimed that these rumors were outright false and that his speech was protected by the First Amendment. In May 2009, the case was settled by American Apparel's insurance carrier for $5 million, with the insurance company paying the bulk of the settlement. The settlement was for half of Allen's initial demand. Dov Charney said that if it had been up to him, he would have continued the case and taken it to trial.
Legalize LA, Legalize Gay, and Pride
In addition to participating in a variety of immigration protests, the company launched an advertising and advocacy campaign called "Legalize LA". The campaign featured advertisements in national papers like The New York Times as well as billboards, T-shirts, bus ads and posters. The company also maintains a Legalize LA portion of their website that features news articles relating to immigration reform, the brand and information on the history of the issue.After the passing of Prop 8 in California in November 2008, American Apparel launched the Legalize Gay campaign. It is similar to the Legalize LA campaign, and shirts with "Legalize Gay" and "Repeal Prop 8" printed on them in the same style as the shirts of Legalize LA are sold by the company.
In June 2012 American Apparel partnered with the Gay and Lesbian Alliance Against Defamation in releasing a new line of T-shirts to celebrate LGBT Pride Month. Fifteen percent of the net sales of the shirts were donated to GLAAD. Isis King modeled for this line, becoming American Apparel's first openly transgender model. In the summer of 2013, American Apparel announced their desire for more "transexy" models.
In 2013, American Apparel was named one of TheStreet.com's "8 Pro-Gay Companies".
Canada
In a November 2010 ad running in Canadian alternative weeklies, the company describes itself as "a majority-owned Canadian company, founded and operated by Dov Charney, a Montrealer". The ad goes on to say, "In the end, one of the important things that makes American Apparel special is its Canadian heritage."In pop culture
In 2010, Kanye West released his album My Beautiful Dark Twisted Fantasy. On this album, the song "Gorgeous" contained the following lyrics: "I need more drinks and less lights, and that American Apparel girl in just tights."The 2013 Capital Cities song "Farrah Fawcett Hair", features a verse in which André 3000 lists a number of things he appreciates, ending with "getting tucked in every night for a month by the American Apparel ad girls". This song became the source for a parody by Willam Belli, Courtney Act, and Alaska Thunderfuck 5000 titled "American Apparel Ad Girls".
In February 2014, the band 5 Seconds of Summer released their hit single "She Looks So Perfect", which included the following lyrics: "You look so perfect standing there
in my American Apparel underwear."
Corporate culture and employment
The production system of American Apparel centralizes most of its employees in a single location. By not outsourcing, Charney believes that he knows his workers better and that it ties them directly to the brand. A banner on top of the downtown factory states "American Apparel is an Industrial Revolution."Charney has stated that American Apparel hires its creatives by their sense of culture and fashion, not their resume. Conversely, the company has also been accused of focusing on personal style and outward appearance in its hiring practices for retail positions.
According to Charney, the unconventional corporate culture at American Apparel is responsible for the company's creativity and rapid growth. He's stated that the company is open about sexuality and its culture because "young people like honesty."
The company has been criticized for its unconventional corporate culture. Charney claimed to have slept with employees, and reportedly masturbated numerous times and had oral sex performed on him by an employee during a series of interviews with a writer for the magazine Jane.
Sexual harassment lawsuits
American Apparel has been subject to seven public sexual harassment lawsuits, though to date, they have all been dismissed, "thrown out," remanded to arbitration, or in one case, settled but with "no monetary liability to the company." In one prominent case, the company was sued by four ex-models for sexual harassment—including one separately named plaintiff who sued the company for $250 million—in a lawsuit which involved mutual nude photographs, sexual text messages and requests for money. The company was accused of being responsible for these leaks in a later lawsuit. However, the case was dismissed by a New York City judge in 2012. In another case, American Apparel was reprimanded in an opinion by the Second Appellate District for a settlement in which plaintiff confessed that she had not been subjected to sexual harassment and American Apparel attempted to issue press release which mentioned an arbitration hearing that had, in fact, never taken place. As of 2013, only one case, a "class action on behalf of all female employees" which contains no "specific allegations against Charney," remains active. In response to the lawsuits, American Apparel has claimed that the lawsuits were extortionary attempts to "shake the company down," and has run advertisements saying so. Charney has maintained his innocence in all the lawsuits, telling CNBC that "allegations that I acted improperly at any time are completely a fiction." The board of directors voted to strip him of his position of chairman in June 2014 and fire him as CEO. Charney responded with legal action attempting to retain his positions.In December 2014, Dov Charney was terminated as the company's Chief Executive Officer after months of suspension. He was replaced by Paula Schneider, president of ESP Group Ltd, company of brands like English Laundry, on January 5, 2015.
Labor
As of 2008, the company employed more than 10,000 people and operated more than 200 retail locations in 20 countries. The company paid its manufacturing employees an average of $12 per hour. According to the San Francisco Chronicle the average factory worker at the company makes $80–120 per day, or roughly $500 per week compared to the $30–40 made daily at most other Los Angeles-based garment factories. Employees also receive benefits such as paid time off, health care, company-subsidized lunches, bus passes, free English as an additional language classes, on-site massage therapists, free bicycles and on-site bike mechanics, free parking in addition to the proper lighting and ventilation. Every floor of the factory includes free telephones where workers can make and receive long-distance phone calls. The company's employees in foreign countries do not receive the same hourly wages as their Los Angeles counterparts. However, employees in China will earn US Federal minimum wage. After going public, the company offered employees as much as $40 million in stock shares. The plan grants employees roughly 1 share of stock for every workday they'd spent at the company. Approximately 4,000 of the company's employees are eligible for the program. In previous years the waiting list for employment at American Apparel has had over 2,000 names on it. In 2010 the company was actively looking for staff following an investigation by US immigration found that 1,500 of its workers lacked the legal immigration documents and were subsequently dismissed.New York Times reporter Rob Walker wrote about the controversy in his book Buying In and revealed that since the unionization drive, the company Sweat X, which was held up as the example for what American Apparel should be, had since gone out of business. He quotes Charney saying more explicitly that "... fucking failed."
The differences between American Apparel and Sweat X were the subject of the 2010 documentary No Sweat.
In 2015, the company hired the union-busting firm Cruz & Associates. The firm was paid a total of $462,343.
Immigration issues
As early as 2001, American Apparel has been a vocal advocate for reform of U.S. immigration laws. On May 1, 2002 American Apparel shut down its factory to allow the company's workers, many of whom are immigrants, to participate in a pro-immigration rally in downtown Los Angeles. Dov Charney, a Canadian, also marched alongside the workers. American Apparel participates annually in the May 1st Immigration March and Rally in downtown Los Angeles. In 2008, they added a route from their factory that eventually connected with other supporters near the city hall. The company's politics were eventually spun off into the Legalize LA advertising campaign.In 2009, an ICE audit of American Apparel's employment records uncovered discrepancies in the documentation of about 25% of the company's workers, implying mainly that they were undocumented immigrants. About 1,500 workers were let go in September of that year as a result. American Apparel responded with questions of the effectiveness of such an action and said " will not help the economy, will not make us safer. No matter how we choose to define or label them are hard-working, taxpaying workers." The ICE audit highlighted a new strategy from President Obama which announced they were shifting away from high-profile raids. According to CEO Dov Charney, American Apparel promised its workers who were fired for improper immigration documentation that they would be given "priority treatment, in terms of being interviewed for future positions with the company," if and when they "got immigration papers in order." Commenting on the loss of 1,500 workers due to concerns over illegal immigration Charney said "It broke our efficiencies and generated a situation where we were late delivering garments. It lost us an enormous amount of money. It cost us agility."
Environmental policies
The company depends on environmentally friendly practices and is known for its innovations in sustainability due to vertical integration. American Apparel manufacturing system is designed around the concept of "Creative Reuse"—which converts excess fabric from one garment template into several additional garments such as bathing suit tops, belts, headbands, bows, bras, underwear and children's clothing. This otherwise wasted material reduces the amount of fabric the company needs to produce in addition to expanding its product line and saves approximately 30,000 pounds of cotton per week.American Apparel maintains a bicycle lending program for its employees and according to People for the Ethical Treatment of Animals it is a vegan-friendly clothing company. As of 2007 the company planned to increase its use of organic cotton within the next four years from over 20% to 80%. American Apparel also sells a line of shirts under the "Sustainable" label that are 100% USDA organic cotton. In 2008, American Apparel purchased over 30,000 pounds of organic cotton known as B.A.S.I.C cotton.
American Apparel installed a 146-kilowatt solar electric system on its factory roof, designed to reduce power costs by at least 20%. These panels power as much as 30% of the factory.
Philanthropy
In 2005, the company hosted a bikini car wash benefit with the American Red Cross to raise money for the victims of Hurricane Katrina. In addition, they packaged and delivered 80,000 shirts to the relief effort in New Orleans and the Gulf Coast. As an underwriter of Farm Aid, American Apparel donates the blank shirts that the organization prints and sells as merchandise. In 2007, right before Christmas, American Apparel donated more than 300,000 articles of clothing, with the giveaway specifically targeting the homeless population of large cities. In 2009, the company had a "Justice for Immigrants" factory sale in Los Angeles—the proceeds of which benefitted organizations such as the Casa Libre Immigrant Children's Homeless Youth Shelter, the Center for Human Rights and Constitutional Law, the Coalition for Humane Immigration Reform of Los Angeles, Hermandad Mexicana Latinoamericana, and the National Day Laborers Organizing Network.American Apparel also donated more than $400,000 worth of garments to the victims of the Haitian earthquake through Fashion Delivers as well as over 5,000 pairs of socks to the shoe charity Soles4Souls.