American Apparel executives and board members regained a stride of control this week: A personal bankruptcy court judge approved their plan to move forward with a reorganization strategy that transfers ownership from the company from shareholders to lenders, and in doing this, strips founder Dov Charney associated with a stake of the company.
Charney continues to be aggressively fighting revisit American Apparel since he was ousted since it’s chief executive amid allegations of sexual misconduct and misuse of company money, and also the court’s move deals a serious and perhaps final blow to his efforts. Plus, it restructures a crushing debt burden that was which makes it hard for the clothing chain to do business.
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“This is as a clean slate as they’re getting,” said Liz Dunn, chief executive at retail consultancy Talmage Advisors.
So ok now what?
The battle with Charney has no doubt been a distraction for American Apparel, but it’s hardly the retailer’s only problem. Sales will be in a tailspin, dropping some 17 percent within the last quarter in which the company reported earnings. (It has not reported sales since your bankruptcy filing in October, but the company says the holiday season was “tough.”)
Paula Schneider, the chief who replaced Charney towards the top of American Apparel, has said the retailer’s weak sales are a symptom of more routine retailing missteps: The item has missed the objective with customers, and stores weren’t put into the right locations and frequently were crowded with too much merchandise.
And now, Schneider hopes that American Apparel – a place to go for wardrobe basics and youthful, edgy pieces such as bodysuits and crop tops – is able to proceed with a brand new focus on the strategy she outlined months ago to turn things around.
“It seems like a little bit of a rebirth, having the ability to be in the very first inning,” Schneider said in an interview Wednesday.
When you are looking at the clothes, Schneider said the organization was able to purchase only about 10 % of the new designs it cooked up for last fall, and people designs composed only about Six to eight percent of the items was in stores. Which should change after the reorganization, so for that spring season, she expects to create a lot more new what to stores, likely 125 to 130 new pieces.
For spring, she said American Apparel will concentrate on selling a new women’s “Best Fav” T-shirt, a wardrobe staple that it hopes will bring back customers who have tired of T-shirt designs that Schneider says feel outdated. How does Schneider be aware of existing women’s T-shirts aren’t striking the mark?
Even in American Apparel corporate offices, she said, “I don’t ever see anyone putting it on.”
Still, it might not be quick or simple for American Apparel to make these types of design updates, especially since clients are attempting to widen its appeal beyond teens and also the college set to young women in their 20s and early 30s.
“It’s going to have a very savvy, creative merchant and planning team to recognize ways to evolve the American Apparel product” for someone who dresses for the office and then really wants to venture out for the evening, said Ann Paulins, who teaches retail merchandising and fashion product development at Ohio University.
This isn’t a busted brand. It’s a busted company
Beyond clothes, Schneider has gone to live in close underperforming stores, trimming the chain’s portfolio from 240 locations to 204 included in a broader cost-cutting initiative it announced last summer. Now that the closures are complete, she said the program would be to result in the remaining stores easier to shop. For that stores that remain, the organization is piloting new merchandising tactics at its Ny outposts. In SoHo, for instance, the team has taken 40 percent of the fixtures from the store floor and axed slow-selling pieces. Schneider said that it appears to become fueling a favourable sales trend for the reason that location and is helping customers easier find what they’re looking for.
Schneider reached American Apparel after it had lost a lot more than $300 million over 5 years under Charney. And yet investors continued to market off the stock after her arrival, driving it down to just pennies a share before it was delisted in October. That may suggest they weren’t confident about the changes she has outlined.
Some employees, too, have staged protests outside American Apparel’s offices to register dissatisfaction under the new leadership.
Analysts said certainly one of American Apparel’s strongest assets in its revival might be that it is clothes are made in america. If leveraged right, that may resonate in just a minute when shoppers are wanting to know where their goods come from.
“Authenticity really matters towards the millennials a lot,” said Kirthi Kalyanam, a professor at Santa Clara University who researches retail.
Craig Johnson, president of Customer Growth Partners, a retail research firm, said his firm routinely surveys mall shoppers, and he finds the American Apparel brand continues to have plenty of cachet with customers.
“This isn’t a busted brand,” Johnson said. “It’s a busted company.”
