American Apparel Cuts Jobs as Plans for Expansion Slow
On Dec. 18, news broke that Los Angeles–based vertical manufacturer, retailer and distributor American Apparel had cut several hundred jobs company-wide. According to Elliot Sloane, a spokesperson for American Apparel quoted in the Los Angeles Times, the cuts were due to a combination of a $15 million machinery and equipment upgrade and a scaled-back expansion plan for 2009.
Marsha Brady, the company’s creative director, said the global financial crisis forced all businesses to review their plans for expansion. “We made the decision to slow our expansion plans temporarily, but we plan to ramp up again as soon as things settle down,” she said. “We’ve experienced record growth in 2008, and we are poised for continued growth in 2009.”
Brady declined to give exact figures for the job cuts, saying that as a vertically integrated manufacturer and retailer, the cuts were made as needed within the company. New hires made up the bulk of the layoffs, Brady said, and the company has plans to call them back in at a later date.
In a statement released Dec. 19, Dov Charney, the publicly traded company’s chairman and chief executive officer, said: “Our business has remained encouraging during the holiday season. We are set to close out a strong 2008 for American Apparel, in which we expect to have opened at least 80 retail stores and to have reported a double-digit same-store sales increase over 2007.” The same release announced American Apparel had renegotiated its debt, extending loans with its revolving credit facility and second lien credit facility for three months. “The amendments, which also modify certain covenants and impose additional obligations, provide the company with the ability to operate its business according to its plan while continuing discussions with its lenders and other parties regarding longer-term financing,” the statement said. Charney added that the company was in discussions with its lenders about the possibility of lengthening the maturity of American Apparel’s debt in 2010 and was also pursuing other financing alternatives.
American Apparel, which operates 240 retail stores domestically and abroad, reached 10,000 employees in September. A Dec. 4 statement by the company reported that November same-store sales in the 156 stores open for 12 months or more grew 6 percent over the same month one year ago. In November 2007, same-store sales were up 42 percent from the previous year. The company opened 12 new retail stores in November. On Dec. 19, American Apparel’s stock, which had a 52-week high of $15.28 per share, closed at $2.30 per share. —Erin Barajas
