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American Apparel Announces Next Phase of Turnaround Plan

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In its life after Dov Charney, infamous founder and former CEO, American Apparel says it will redesign its merchandise, shake up its leadership team and find new ways to cut costs and get the oft-gossiped brand back on better footing.

The basics brand announced the next phase of its turnaround strategy Monday, saying it would unveil a new fall line focused on advanced basics and key items for women and men.

“Historically, the fall season has not been a major focus for the company. We are beginning the process of re-merchandising the product assortment in our retail stores to increase productivity by SKU,” said Paula Schneider, who took the helm as CEO of American Apparel at the start of this year. “The new styles are designed to increase revenue as we continue to evolve our product offering during this important selling season,” she added.

Cost cutting will be another top priority at American Apparel, which counts the effort necessary for competing in today’s promotional retail environment with volatile foreign exchange markets. The retailer said it will close underperforming stores to drive productivity improvements and streamline its workforce to reflect the downsize in stores.

The reduction initiatives are expected to cut the company’s operating costs by roughly $30 million over the next 18 months.

And each effort is aimed at returning the retailer to financial stability. American Apparel management will also address legacy issues like improving SKU mix, maximizing new retail, e-commerce and wholesale opportunities and increasing supply chain agility—not to mention the damage control now necessary due to Dov.

The jilted ex-leader has initiated roughly 20 lawsuits and administrative actions against American Apparel, all of which the company believes are “meritless” and says will be “vigorously” defended.

Charney’s latest lawsuit includes a pursuit of damages to the tune of $30 million for defamation and what he deems “wrongful termination” when the company relieved him of his post last December following a string of sexual harassment claims from former employees.

But all of the outlined initiatives could still leave the retailer reeling as it likely won’t have the necessary financing to meet funding requirements for the next year without raising more capital, and a company investor statement warned that there’s no guarantee American Apparel will be able to raise that additional capital.

“We are committed to turning this company around. 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,” Schneider said. “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.”

In terms of refining its leadership, the company hired Christine Olcu, who has held roles at Express, Mexx and Club Monaco, as general manager of global retail and Brad Gebhard, who has already been consulting the company for the last four months and has worked at Nike, Speedo USA and Columbia Sportswear, as president of wholesale to help execute the turnaround tactics.

“We are looking forward to working with Christine and Brad to leverage their expertise, which will be invaluable in delivering compelling products to our customers,” Schneider said. “We are proud of our heritage as the largest apparel manufacturer in North America, and the initiatives announced today are designed to enable us to return to profitability so that we can continue to serve our loyal customers and provide fair wages to our dedicated employees for years to come.”

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