American Apparel saga continues: May need more cash

Los Angeles -- American Apparel on Monday announced it would close some stores as part of a $30 million cost-cutting initiative in its strategic turnaround plan. (American Apparel CEO Paula Schneider discussed the plan with CSA in a recent interview.) The embattled company also made two other revealing disclosures.



American Apparel, which has lost money for the past five years, said that even if it increases revenue and cuts costs, it may still have to raise additional capital to meet funding requirements for the next twelve months.



“And there can be no guarantee that it will be able to raise such additional capital,” the company stated.



In another disclosure, the retailer said it is currently involved in approximately 20 lawsuits and administrative actions initiated by company founder and ousted CEO Dov Charney and his associates. American Apparel called the cases “meritless” and said it intends to “vigorously defend such actions and, where possible, pursue remedies against Mr. Charney for his actions.”

.

American Apparel, which operates 239 stores, said it plans to close an unspecified number of underperforming” stores in “unprofitable and oversaturated markets” over the next 18 months and will reduce its workforce to reflect its smaller footprint and "general industry conditions." But the company is not closing the door on expansion, saying it will "look to add new stores in profitable fast-growing territories."



"We are committed to turning this company around,” said Paula Schneider, who took over as CEO in January 2015. “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."



The company also announced two new hires, including Christine Olcu, most recently with Express, as general manager of global retail. She will lead the brand’s current retail country managers in optimizing merchandizing and sales at American Apparel's store locations. She will also work to improve store productivity.



It also named Brad Gebhard as president of wholesale to help execute its global retail and wholesale turnaround strategies. 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. He has held senior leadership, operational, and branding roles at apparel companies, including Nike, Speedo USA, Columbia Sportswear, and Adidas.