American Apparel's recent advertising choices seem to be part of a bigger plan to prove that they're "a company that celebrates natural beauty" (or will do anything for press). Too bad those choices aren't translating into um, real money.
On Thursday, the Wall Street Journal reported that American Apparel had hired the law firm Skadden, Arps, Slate, Meagher & Flom LLP "to work on restructuring options" for the company. While the Journal said it was "unclear" exactly what Skadden would be doing for AA, they noted that bondholders had encouraged Skadden's involvement to get the company – which has been profitable basically never – on a better financial track.
After that news broke, shares of American Apparel Inc. dropped 32 percent. Though the company's third quarter losses were significantly less than their second quarter losses ($1.5 million versus $19 million), shares of the company have hovered in the one dollar or less range. In light of this decidedly negative news, Women's Wear Daily noted that there have been discussions in the financial community about whether Skadden's "restructuring" could actually just mean organizing a bankruptcy filing.
It's cool though: CEO Dov Charney doesn't think the stock market is All That. "The stock market is a voting machine and eventually becomes a weighing machine at certain points in the trajectory of a company, and proof comes at the moment of weighing," he said recently. Though his company's wholesale sales have increased slightly from last year, same store sales are down. In early February, Charney blamed the loss on a potpourri of factors:
We believe that our same store sales were negatively impacted by the extraordinarily cold winter weather and winter storms in the U.S. during January 2014. The impact may have been more pronounced for us as we have a high concentration of stores in the areas affected by the bad weather. The decline in online comparable store sales was primarily due to a shift in 2014 sales from the online segment to the wholesale segment as a result of significant sales growth from an online distributor, and the effect of a change in the timing of an international promotion. The 7% growth in wholesale net sales is noteworthy given it is on top of a 13% increase last January.
Should it manage to make it through a seemingly inevitable bankruptcy filing once dodged before, it would take a great deal of work to change the legacy of American Apparel. At this point, the company's status as a rare U.S. clothing company that pays its workers a fair wage and actually makes its product in America will forever by tainted by its sexually harassing CEO/founder who makes consistently poor business decisions.
Images via American Apparel