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American Apparel: Store Closings & Cost Cuts

(Filed Under Financial and General Interest News). In early July, American Apparel announced “the next phase of its strategic turnaround plan, including a redesigned fall merchandise line, approximately $30 million in cost-cutting initiatives, and key additions to its leadership team.”

In one initiative later this year, the company will launch a fall line focused on advanced basics and key items. “Historically, the fall season has not been a major focus for the company. We are beginning the process of re-merchandising the product assortment in our retail stores to increase productivity by SKU,” said Paula Schneider, CEO. “The new styles are designed to increase revenue as we continue to evolve our product offering during this important selling season.”

American Apparel’s cost cutting initiatives “are expected to reduce operating expenses by approximately $30 million over the next 18 months,” according to the firm, and will include “closing under-performing retail locations to drive productivity improvements. In connection with these store closures, the company will streamline its workforce to reflect a smaller store footprint and general industry conditions. Going forward, the company will look to add new stores in profitable fast-growing territories while reducing its footprint in unprofitable and over-saturated markets. These initiatives, some of which will begin immediately, are aimed at stabilizing the company financially by maximizing retail store performance and revamping the company’s product merchandise assortment.”

American Apparel has posted significant losses in each of the last four years (2011 through 2014). Sales were $608.9 million last year, the lowest in three years, while at the same time it posted a loss of $68.9 million. At the end of 2014 its embattled CEO, Dov Charney, was ousted.

In a frank assessment of the challenges it faces, the company admitted, “management continues to address a host of legacy issues including improving SKU mix, rationalizing the company’s real estate portfolio, strengthening the brand’s creative marketing, maximizing new retail, e-commerce and wholesale opportunities, increasing supply chain agility, and improving expense management processes. In addition, management is defending the company against approximately 20 lawsuits and administrative actions initiated by company founder Dov Charney and his associates. The company believes these cases are meritless and intends to vigorously defend such actions and, where possible, pursue remedies against Mr. Charney for his actions.”

The company goes on to warn, “Even if American Apparel increases revenue and cuts costs, there can be no guarantee that the company will have sufficient financing commitments to meet funding requirements for the next twelve months without raising additional capital, and there can be no guarantee that it will be able to raise such additional capital.”

Schneider assured, “We are committed to turning this company around. Today’s announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability. Our primary focus is on improving the processes and product mix that have led to steep losses over the past five years. Our customers, employees, and local communities around the world believe that American Apparel is an iconic brand that deserves to succeed. My job is to make that a reality.”

At the same time it laid out its restructuring plans, American Apparel announced the hiring of Christine Olcu as general manager of global retail and Brad Gebhard as president of wholesale “to help execute its global retail and wholesale turnaround strategies.”

The company explained that “Olcu will lead the company’s current retail country managers in optimizing merchandising and sales at American Apparel’s store locations. She will also facilitate the company’s ongoing fleet optimization, and actively improve store productivity. Olcu has a strong background in building retail businesses of various sizes, having held senior leadership roles at companies including Express, Mexx Canada, Indigo Books, Music, Inc. and Club Monaco.”

Gebhard will focus “on increasing the company’s imprintable and business-to-business sales. He will also oversee Oak, a New York-based specialty retailer the company acquired in 2013. Gebhard has served as a consultant to American Apparel for the past four months and already has a deep understanding of the company’s business and processes. He has held senior leadership, operational, and branding roles at apparel companies, including Nike, Speedo USA, Columbia Sportswear and Adidas.”

more Financial and General Interest News >>

Published 07-13-2015 by -

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