The company is trying to pull off a turnaround under new management appointed by the hedge fund that now controls it. But according to internal documents seen by BuzzFeed News, sales are still falling.
Provided to BuzzFeed News
American Apparel is off to a rough start in 2015, according to internal documents reviewed by BuzzFeed News, with sales at its retail stores plummeting by almost 11%.
The dire figures are fueling the already bitter feud between founder Dov Charney, who was fired last year, and the hedge-fund-backed management which now runs the company. The collapsing sales are also spreading fear among the company's garment workers who, almost uniquely in the fashion business, still work in the United States, in its downtown Los Angeles factory.
Sales at its retail stores are down 10.9% as of March 31, compared to the same period last year, with dips exceeding 15% in core markets like New York, Los Angeles, and Chicago. The documents, which are unaudited and do not reflect finalized numbers for the quarter, show American Apparel's sales decline has continued in the wake of its worst holiday season in four years. Two weeks ago, the company reported a 9% overall sales drop in the final three months of 2014, and a 4% drop for the 2014 calendar year.
Online sales are a bright spot, with comparable revenue up 17.8%, although in 2014 online accounted for only 10% of the overall pie. Sales at the wholesale division, which accounted for about 30% of the total last year, fell 2.3%. Meanwhile, in its stores average unit retail — that is, the average price of a single item sold in its retail stores, from scrunchies to T-shirts — has also suffered mightily, falling 29% in the 28 days up to April 1 from the same period last year, the documents show.
BuzzFeed News was shown detailed internal sales reports from Feb. 28, March 1, March 16, March 28, and April 1, offering a rare, granular look at American Apparel's performance under a new management team struggling to reshape the company. Four sources familiar with the company provided the documents, which were reviewed for accuracy by two current employees. All cooperated for this story with the intent of illustrating the brand's ongoing struggles under the new management team, which they oppose; all requested anonymity due to the sensitivity of the information and concerns of retribution.
The first quarter is typically just one-fifth of the year's revenue, as American Apparel tends to be more of a spring and summer retailer. But employees are concerned that sliding sales will continue, imperiling the company's cherished brand and the jobs of its roughly 10,000 workers, 180 of whom were laid off last week.
The columns to pay attention to are regions and total sales. The 7-day runrate is an estimate for the year's retail sales based on the past seven days. Comparable sales exclude the impact of new, closed, or moved stores.
Obtained by BuzzFeed News
For those who haven't been following: Charney, 46, started building American Apparel in the '90s, brought it public, and was its CEO up until last June, when his board turned on him with a surprise termination letter alleging he misused corporate assets, violated sexual harassment policies, and more. Charney formed a risky partnership with a hedge fund called Standard General that increased his stake in the business but ceded his ownership control to the firm. He believed the hedge fund would reinstall him, working as a consultant of sorts for American Apparel during a third-party investigation.
Instead, he was fired in December from the consultant role after the investigation concluded and replaced in January by Paula Schneider, a retail executive who most notably oversaw the swimwear group at Warnaco, which owns and licenses brands like Speedo and Calvin Klein Swim, and Laundry by Shelli Segal. Schneider told 20/20 last month Charney will never be reinstated. That message was reiterated in a memo to staff on March 26 that's included below.
So now, Standard General and its appointees are running one of America's most visible and provocative clothing brands, which is also the largest garment manufacturer in North America. The hedge fund has overseen the installation of a new board, CFO, general counsel, and other senior managers. The company has also hired a new creative team and dismissed a number of longtime employees with close ties to Charney as it tries to make the brand less "overtly sexual" and more focused on social issues that "millennials care about."
But it's already been criticized for losing its realness: An American Apparel casting call from an external agency went viral last month after it called for "real models," not "Instagram hoes or thots"; the company has also been airbrushing nipples and pubic hair from its website.
American Apparel's board and new management have argued that while Charney built an iconic brand in the past 18 years, he wasn't fit to run a publicly traded company — essentially, that the place wasn't run by grown-ups. They pointed to a stock in the $1 range, a failure to post an annual profit since 2009, and expensive, embarrassing sexual harassment lawsuits, which have dominated coverage of the founder for the past decade. As Standard General partner David Glazek told Bloomberg Businessweek last year: "We look for good businesses with bad balance sheets that can be fixed...Chaos has a cost. We want to institutionalize things."
But the chaos has only increased since June.
Current and former employees have seethed against new management, particularly as Charney looks for a way back into the company, waging email campaigns and petitions on his behalf, and rallying factory workers, who have endured furloughs and unplanned cuts to their hours since his exit.
Cuts on the factory floor, which will comprise some of the 180 layoffs announced last week, have led to inventory issues in stores, where top-selling items aren't available because they aren't getting made fast enough, two employees told BuzzFeed News on the condition of anonymity. But a separate source familiar with the company said the shortages can be blamed on poor demand forecasting under Charney's leadership, when the company was offering more than 4,000 styles.
American Apparel's new management had its first major clash with Charney and longtime staff last fall, when it hired a liquidator called Great American Group to clear inventory through what it called a "dot sale." A presentation from Great American, included below, shows the promotion was intended to boost comparable sales by 20% — instead, sales plummeted in the fourth quarter.
The frustration around the dot sale is easy to understand after looking at photos of stores with the signage. During the sale, American Apparel looked more like a Kmart or a Burlington Coat Factory than an edgy hipster brand, former employees complained.
Internal American Apparel Data Shows Sales Are Slumping http://ift.tt/1IDJZnS
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