California Apparel News

It’s a new chapter for American Apparel Inc.

Last year, the beleaguered company sailed through stormy waters when it fired Dov Charney, its founder and chief executive officer, and installed a couple of caretaker CEOs to helm the company until a permanent replacement could be named.

Fashion veteran Paula Schneider formally took the reins of the downtown Los Angeles–based company on Jan. 5, and she held a conference call with Wall Street analysts on Jan. 20 to talk about where she wanted to guide the brand, which makes its basic clothes for women, men and children in California.

During the call, Schneider said she plans to strengthen the foundations of the company by fortifying basic operations such as supply chain, sales and product development as well as planning and forecasting.

“American Apparel is about youth, fun, freedom and social commentary,” Schneider said. “Over the next several months, we will focus on improving our business fundamentals to compete in the marketplace and position ourselves for long-term success. The foundation of this company is solid, and we’re starting with a great platform.”

She said she hopes the efforts will drive up earnings for the company. Its gross profit declined 2 percent to $82.5 million in a year-over-year comparison. There was a reported 5 percent net sales decline for the third quarter, reported Nov. 10, from the previous year. Same-store retail sales declined 7 percent, but wholesale sales increased by 2 percent during the third quarter. The company also has liquidity issues. It had $9.4 million in cash as of Sept. 30 and $27 million outstanding on $50 million in an asset-backed revolving credit facility.

During the call, Schneider said the brand is strong enough to overcome these liquidity issues. Dave King, an analyst with Roth Capital Partners, headquartered in Newport Beach, Calif., applauded Schneider’s experience in brand management and operational management when serving as CEO for Big Strike LLC, Warnaco Swimwear Group and Laundry by Shelli Segal.

King forecast that Schneider will make a good team with American Apparel’s new chief financial officer, Hassan Natha. In a Dec. 17 research note, King forecast that the duo will cut “underperforming business segments and effectively monetize others.”

A day after the call, American Apparel’s stock declined 3.56 percent, according to Yahoo Finance.

The company also made news this month for attempting to change its corporate culture. The company has been known for its provocative advertising and work environment. A new company rulebook banned romantic relationships between management and employees.

“No employee who has a personal relationship or romantic relationship with another employee may be in a position with any perceived or actual influence over the other’s terms of employment,” according to new rules on American Apparel’s website.