American Apparel: A Last Chance Lost?

The latest announcement from American Apparel would have been a real “yawner” had it not involved two people who are polar opposite people, yet identically iconic in polar opposite ways.

First there’s Dov Charney, the remarkably visionary Founder and CEO of American Apparel, and devil incarnate according to many, including several young female staffers who have accused him of and sued him for sexual harrassment. Need I remind you of the now infamous interview with a reporter from Jane Magazine in 2004, during which Charney goes beyond exposing himself?

On the other iconic pole, if you’ll forgive the unfortunate expression, there’s Marty Staff, hired last March to be American Apparel’s President of Business Development who, not surprisingly, recently announced his departure from the company.

While Marty Staff could be described as eccentric, even outlandish at times, and in my opinion every bit as creative as Dov Charney, he also has a razor-sharp business and strategic mind, as demonstrated by his successful track record as CEO of JA Apparel (owner of the Joseph Abboud brand) and earlier as CEO of Hugo Boss, and precisely what Mr. Charney needed to turn his financially troubled business around.

The company has been wobbling on the edge of disaster for some time, losing $86 million in 2010 with a double digit sales decline. In its most recent fiscal quarter, it suffered a net loss of $213,000 on sales of $133 million, its sixth consecutive quarterly loss. Debt hovers around $170 million, and Charney seems to be on a never-ending quest for capital infusions to keep the business from tipping over. The stock price has been around a dollar for most of the year, having fallen from its peak of $15.60 a share in 2007. Finally, and not so incidentally, Charney has been sued for a total of more than $250 million by four female ex-employees.

Quite frankly, it amazes me that as CEO of a publicly owned company, given American Apparel’s financial condition and his questionable and storied behavior, Charney still has a job.

Therefore, I would describe Mr. Staff’s departure as Charney’s last chance for survival, lost.

Mr. Staff’s adieu was not surprising. From American Apparel’s inception, Charney’s tyrannical and micro-managing style has been well known. And, of course, his style, along with his apparent inability to grow a profitable business, even one whose brand has an almost cult-like following among young urban consumers, simply begged for a strong business and strategic mind. Remember Calvin Klein’s Barry Schwartz and other successful creative/business teams?

Marty Staff was to be the “white knight” to stabilize and help put the business on a profitable growth trajectory and, in my opinion, could have done so. But, with the title of President of Business Development in a business that needs serious strategic growth and profitability surgery, it’s crystal clear that he was not given nearly enough authority and latitude to do so, and therefore, departed.

Perhaps another last chance for saving American Apparel will present itself through a third-party financial deal with someone like Marty Staff returning on terms of his or her own. If not, or without another “white knight” with a business head, I believe Charney will continue to iterate the business downward, eventually running it into the ground.

Robin Lewis About Robin Lewis

Robin Lewis has over forty years of strategic operating and consulting experience in the retail and related consumer products industries. He has held executive positions at DuPont, VF Corporation, Women’s Wear Daily (WWD), and Goldman Sachs, among others, and has consulted for dozens of retail, consumer products and other companies. In addition to his role as CEO and Editorial Director of The Robin Report, he is a professor at the Graduate School of Professional Studies at The Fashion Institute of Technology.